Archive for August, 2011

Oregon Shifting to Judicial Foreclosures

My blogs generally focus on events in Florida, as that’s where I’m licensed to practice law (and help homeowners facing foreclosure), but this article about the foreclosure process in Oregon has caught my attention. 

Apparently, Oregon has been a non-judicial state for many years, meaning that banks wishing to foreclose on homeowners did not need to prevail in court to do so.  In recent months, though, Oregon judges have realized that banks were foreclosing when they lacked the right to do so (shocking, I know), prompting those judges to halt the non-judicial foreclosure process so much that the banks actually want judicial foreclosures. 

This is absolutely awesome.  Kudos to these Oregon judges for standing up for the rule of law, allowing foreclosures only when banks have the requisite proof to obtain them. 

Here’s the article. …

Their preferred method in legal limbo, lenders are gearing up to move Oregon foreclosure sales from the courthouse steps into the courtroom itself, with significant implications for both homeowners and the housing market.

For half a century, the vast majority of the state’s residential foreclosures have occurred without a judge’s involvement. Oregon is one of 24 states that allow nonjudicial foreclosures, provided lenders give borrowers proper notice, publicize the sale and abide by other requirements.

But late last year, federal judges began blocking them, ruling that lenders had failed to follow one of those requirements: filing the mortgage’s ownership history in county records.

No one can say how many of the estimated 26,000 foreclosures pending in Oregon will ultimately land in front of a judge. But attorneys and trustees involved in both processes say hundreds of files are being reviewed.

“It could be thousands, ultimately,” said Lance Olsen, attorney with Routh Crabtree Olsen in Bellevue, Wash., whose affiliate, Northwest Trustee Services Inc., is the largest nonjudicial service provider in the West.

Judicial foreclosure
Original method: Around since the 1800s.
More costly: Court filing and attorney fees increase the costs for the lender and possibly the borrower.
Court oversight: Borrowers get a hearing before a judge where they could challenge the foreclosure.
Sheriff’s involvement: Local sheriff actually sells property after the court rules.
Right of redemption: Up to 180 days after sheriff’s sale, borrower has right to reclaim the property by matching the winning bid.
Length: Entire process could take close to a year.

The move is just one of the hurdles lenders face this year in both Oregon and Washington as they try to work through a backlog of foreclosures and delinquent loans. It’s a shift for distressed homeowners, who will lose some rights but gain a public hearing where they can plead their case.

It also threatens to throw another wrench into the state’s broader housing market, where data suggest prices still have not bottomed out. In the first half of this year, foreclosures and short sales made up nearly half of all home sales in the state, much higher than the national rate of 28.5 percent, said Selma Hepp, an economist with the National Association of Realtors.

The foreclosure process in Oregon already had slowed, possibly because of the legal uncertainties. Between June 2010 and June 2011, the state’s foreclosure inventory increased 1 percent, the third-largest increase among nonjudicial states. Experts estimate it would take at least a year to work through the 26,000 properties that make up Oregon’s shadow inventory — properties nearing or already in foreclosure but not yet listed for sale.

If foreclosures go to court, the process will take considerably longer, on average. In the 26 states where judicial foreclosures are the only option, loans sit delinquent for an average of 728 days before a foreclosure sale, compared with 550 days in the 24 nonjudicial states, according to Lender Processing Services.

Lender security

Not all judges agree that out-of-court foreclosures have run afoul of Oregon law. But lenders have concluded they can’t wait for the Oregon Supreme Court to resolve the issue, which might not happen for a year.

“There’s now, for a lender, less certainty and probably more expense with the nonjudicial route,” said William Larkins, an attorney with Larkins Vacura in Portland who represents lenders. “The process that was considered more cumbersome and longer is starting to look shorter and more predictable.”

In two cases since March, Larkins has filed judicial foreclosures in Multnomah and Jackson counties on behalf of Deutsche Bank National Trust Co. He expects to file a third soon on behalf of OneWest Bank.

Fannie Mae, in at least one case, also appears to be heading to court. In July, the mortgage giant and Northwest Trustee Services halted a foreclosure in Medford to avoid “the cost and uncertainty of litigation associated with the nonjudicial foreclosure,” said John Thomas, Fannie Mae’s attorney, in a court filing.

Nonjudicial foreclosure
Newer: Available since 1959.
Less costly: No requirement to go before a judge or hire a lawyer.
Quicker: Set up to take 120 days, though it rarely does.
Public recording: The trust deed, any assignments of trust and any appointment of a successor trustee must be recorded in county recorder’s office where property is located. Several courts in Oregon say lenders have failed to meet this requirement.
Proper notice: Notice of default must be filed in county recorder’s office and sent to borrower by certified mail. Notice of sale must be given to both borrower and tenants at least 120 days before a foreclosure sale. It also must be published in a newspaper of general circulation once a week for 4 weeks, at least 20 days before sale.
Right to cure: Borrower has right to pay all missed payments and lenders’ fees up to five days before sale to cancel foreclosure.
Auction sale: Trustee auctions off property on courthouse steps to highest bidder.
Sources: The Oregonian research; William Larkins

The lender’s decision came a month after U.S. District Judge Owen Panner issued a temporary restraining order preventing Fannie Mae and Northwest from selling Jack and Laura Burns’ Medford home in foreclosure.

Two Portland-area borrowers say they’ve been told by their trustee or servicer that Wells Fargo Home Mortgage had suspended their sale date and forwarded their file to attorneys.

Pam Laxson, a real estate agent whose home in Sandy is in foreclosure, said a Fidelity National Title Insurance Co. representative said her file was among 600 being transferred to attorneys for judicial foreclosure. She later received notice that Shapiro & Sutherland, a Vancouver firm specializing in foreclosures, was now handling her file.

A Fidelity employee in California referred questions to Wells Fargo, whose spokespeople declined to comment. Kelly D. Sutherland, the law firm’s managing partner, also declined comment.

Laxson, 50, bought her three-bedroom home for $206,000 in 2005. Her husband, Lindsay, died in 2007 after a 10-year bout with multiple sclerosis. She was laid off in 2008 and went to school to retrain as a certified nursing assistant. She now works as a certified medication aid at a rehab center in Clackamas while still trying to sell homes.

Laxson estimates her household income is now one-third what it was when she bought her home. She said Wells Fargo has repeatedly denied her requests for loan modifications, a short sale and a deed in lieu of foreclosure.

“Sometimes I try to hate my house,” Laxson said. “I need to hate it because I might have to leave. But I can’t find very much I hate.”

A homeowner defense

Each side gains different advantages and disadvantages in a judicial foreclosure, attorneys say.

If homeowners don’t challenge the filing, the lender could get to a sale date more quickly, attorneys said. The law also requires the foreclosing lender to produce only the original note, not a history of all subsequent owners.

“My lender clients have the original notes, and they’re providing them to me,” lender representative Larkins said.

But if borrowers challenge the filing, a judge will hear their complaints, a right unavailable in a nonjudicial foreclosure unless a lawsuit is filed.

“If you have a real defense to the foreclosure, you’re clearly better off in the judicial system,” said Phil Querin, a real estate attorney in Portland. “You get to play defense and the court has to make a decision before the foreclosure happens, assuming you can afford a lawyer.”

Borrowers face other risks, too.

Oregon law protects homeowners from being pursued by lenders for their losses should the home sell for less than the balance on the loan. But that protection could disappear if borrowers move out of the home before a foreclosure complaint has been filed in court, attorneys said.

That concerned Laxson, who said she only knew of her foreclosure’s changed status because she happened to call Fidelity to ask a question about her sale date. She immediately stopped packing and, for now, plans to stay put.

“It would be horrible to move out and then potentially be held liable for a deficiency you were completely unaware you could incur,” Laxson said.

In a judicial foreclosure, borrowers also lose their right to cure, which gives them up to five days before the sale to pay their missed payments plus lender fees and end the foreclosure.

But borrowers gain what’s called a right of redemption, which gives them up to six months to repurchase the home for what it sold for at the foreclosure sale.

That redemption right will make properties bought out of foreclosure difficult to immediately resell, attorneys say, and possibly leave them vacant for longer periods. Querin speculates it could even lead to a black market for redemption rights in which borrowers sell to investors the right to repurchase the property.

It’s also unclear how county law enforcement will handle the increased caseload. Law requires judicial foreclosure sales to be conducted by local sheriff’s offices.

Mark Stopa

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Explaining Wall Street Fraud

This article does a fine job of explaining how Wall Street committed fraud in the housing market – not inadvertent oversights or negligent misconduct … fraud.

Here’s the article …  

A central question in the financial crisis is whether Wall Street simply made errors of judgment that led to a housing bubble or whether it knowingly broke the law. Did the gun go off accidentally, in other words, or did the shooter aim at the victim’s head? That’s critical to find out because it informs our approach both to fixing the banking industry and to deterring such conduct in future.

New evidence increasingly points to murder, rather than manslaughter. D. Keith Johnson, former president of Clayton Holdings, a company that assessed the quality of mortgages for banks and credit rating agencies, recently told the Financial Crisis Inquiry Commission that he warned these firms that nearly half the loans were duds. Investment banks used them anyway:

Mr. Johnson said he took this data to officials at Standard & Poor’s, Fitch Ratings and to the executive team at Moody’s Investors Service (MCO).

“We went to the ratings agencies and said, ‘Wouldn’t this information be great for you to have as you assign tranche levels of risk?’ ” Mr. Johnson testified last week. But none of the agencies took him up on his offer, he said, indicating that it was against their business interests to be too critical of Wall Street.

Among investment firms, some of the biggest offenders in deliberately using dodgy loans were Deutsche Bank (DB), Morgan Stanley (MS) and Freddie Mac (FMCC). Clayton found that roughly 37 percent of the mortgages Morgan wanted to buy in 2006-07 failed to meet their own underwriting standards. Nevertheless, the New York bank used more than half of those loans in building mortgage-backed securities, apparently without disclosing that to investors. Freddie, which is unlikely ever to repay the billions of dollars it was forced to borrow from taxpayers, used 60 percent of the defective loans.

Wall Street firms didn’t merely ignore such information; they also used it as intel to negotiate better prices on the loans they bought from originators for packaging into CDOs and other mortgage-backed securities, said another Clayton employee.

Such disclosures go beyond undermining financial executives’ claims that they didn’t see the crash coming. They illustrate a pattern of intent by big banks to sell financial products they knew were defective. That’s not a misjudgment — it’s fraud. As a former white-collar prosecutor recently told me:

If you lie to somebody to get them to give you money, you have stolen money from them.

Johnson’s testimony supports other evidence suggesting Wall Street defrauded investors. Banks like Citigroup (C), Goldman Sachs (GS) and Merrill Lynch faked demand for CDOs, or mortgage pools, by creating yet other CDOs to buy up the securities. They also colluded with ratings agencies to misrepresent the creditworthiness of these investments. On the back end of this chain of deception, JPMorgan Chase (JPM) and other industry players appear to be rushing to seize people’s homes by illegally rubber-stamping foreclosure documents.

If it’s hard to accept that fraud was central to the crisis, it’s largely because the monumental scale of the deception is hard to process. See those trees over there? That’s a forest, and it’s burning like cordwood. It’s also because, during the boom, some of the key operating principles underlying the financial system itself were inverted.

Ordinarily, growing demand for mortgages is what creates demand for mortgage-backed securities. During the housing boom, however, that dynamic got reversed — surging demand for securities by Wall Street and investors led to an orgy of bad lending. The cart took the horse on a merry old gallop.

That pattern became hardwired into a financial system, encouraging bad behavior. Laws are broken, ethics (if they exist) smashed to bits. Here’s how the anonymous financial exec who writes over at The Fourteenth Banker put it:

The profits that were generated by this activity dwarf the potential cost. Executives’ incentives are to produce gains today and they do not pay for the risks that are left for tomorrow. The decision to have individual employees sit and sign affidavits that are false was made consciously. Someone decided to save the expense of doing it right. Or someone figured out that the chain of title had already been broken and it is better to whistle past the graveyard and defraud a court, a debtor, an investor, or a shareholder, than it is to do the right thing.

[T]he truth is that decisions to cut corners, commit fraud, abuse clients or mislead investors are generally cognitively rational given the position in which the individual employee is put.

In short, guilty.

Mark Stopa

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Schneiderman for President?

New York Attorney General Eric Schneiderman released a statement today, below, regarding the launch of the federal Consumer Financial Protection Bureau (as he continues to distance himself from other Attorneys General throughout America who are selling themselves out for big banks). 

My immediate reaction?  FINALLY!  How refreshing!  Somebody who gets it!  Somebody in politics who realizes it will take more for America’s economy to improve than appeasing the big banks at every turn. 

Schneiderman should run for President.  Seriously.  I don’t know anything else about him, but just knowing what I know about his stance on this issue, it’s clear he can separate himself from almost every politician and appeal to a huge segment of the American public – merely by expressing a willingness to improve the economy in a real way, without just appeasing Wall Street.  And if you don’t think that’s enough to be a Presidential candidate, let me ask you – who else is there?  And what’s more important than fixing the economy (in the way set forth in his statement, below)?

I love his website, too, which says:

As Attorney General, my top priority is to restore New Yorkers’ faith in their public and private sector institutions. From cracking down on corruption in government, to rooting out fraud against taxpayers, to protecting consumers from financial crimes, and keeping our streets safe, I will work every day to build the best public law firm in the country to serve and protect all New Yorkers.

Anyone willing to crack down on corruption in government (when most won’t even acknowledge its existence) deserves recognition, regardless of his other views.  Bravo, Schneiderman, bravo. 

Here’s the statement …

 “Our office welcomes the opening of the federal Consumer Financial Protection Bureau, and we look forward to working closely with the agency to advance the financial best interests of New York’s consumers. Nearly three years after the financial crisis dragged the economy into recession, there is much work to be done to restore confidence in the markets for everyday people, businesses and investors. As a watchdog holding financial institutions accountable for wrongdoing, the CFPB will play a critically important role in developing a regulatory framework that ensures consumers are protected, and our economy is not vulnerable to another financial meltdown. It is now up to the Senate to expeditiously confirm Richard Cordray as CFPB’s Director, so that the bureau can fulfill its full mandate under the law.”

Mark Stopa

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Attorneys’ Fee Awards Require Expert Testimony … If You Object

As a foreclosure defense attorney who represents homeowners throughout Florida, I’m intimately familiar with the shortcuts taken by foreclosure mills in trying to “push through” foreclosure cases. One tactic I repeatedly see is requests for attorneys’ fees as part of a summary judgment motion. Typically, the plaintiff’s attorney signs an affidavit that his fees are reasonable, and another attorney, acting as an “expert,” signs an affidavit opining the same, and the bank requests that these fees be included as part of the Final Judgment of Foreclosure. This may sound like a legitimate approach, but here’s the thing. If you object to the court’s consideration of attorneys’ fees by affidavit, and insist on the “expert” testifying live, in open court, you should prevent the court from awarding attorneys’ fees at a summary judgment hearing. This is not an area of law in which the judge has discretion; attorneys’ fees cannot be awarded based on affidavits when the opposing party insists on live testimony. When I see this issue (and I see it in essentially every foreclosure case), here’s what I do. I file an objection, and argue as follows:

1.  In its Motion for Summary Judgment, Plaintiff attempts to tax attorneys’ fees and costs. In support, Plaintiff provides an affidavit of its counsel and an affidavit of an alleged expert.

2.  The affidavit of this “expert” lacks facts and is conclusory in nature. Under the circumstances, Defendants want to cross-examine this alleged “expert” as to the factual basis of the affidavit.

3.  Under controlling law, attorneys’ fees may be awarded upon presentation of affidavits, without live testimony, if the party opposing the entry of fees does not object. See DM Records, Inc. v. Turnpike Commercial Plaza, 894 So. 2d 1030 (Fla. 4th DCA 2005); Ins. Co. of North America v. Julien P. Benjamin Equip. Co., 481 So. 2d 511 (Fla. 1st DCA 1985).

4.  In this case, however, Defendants are objecting to the use of affidavits in lieu of live testimony. As such, an evidentiary hearing on the Motion is required. See Dvorak v. First Family Bank, 639 So. 2d 1076 (Fla. 5th DCA 1994); Dhondy v. Schimpeler, 528 So. 2d 484 (Fla. 3d DCA 1988); Soundcrafters, Inc. v. Laird, 467 So. 2d 480 (“the trial court erred in permitting Laird’s sole expert to testify by way of affidavit over Soundcrafters’ objection.”); Terrazzo, Inc. v. Altman, 372 So. 2d 512 (Fla. 3d DCA 1979); Geraci v. Kozloski, 377 So. 2d 811 (Fla. 4th DCA 1979) (“In an adversary proceeding such as this the determination of an attorneys fee for the mortgagee based upon affidavits over objection of the mortgagor is improper. Evidence should be adduced so that the full range of cross examination will be afforded both parties.”).

5.  As evidence is not permissible at a summary judgment hearing, see Fla.R.Civ.P. 1.510, it would be reversible error to award attorneys’ fees via summary judgment. See cases, supra.

As I see it, this is a really simple way to prevent banks from tacking on attorneys’ fees at a summary judgment hearing. Banks and their lawyers don’t like it, but short of asking the judge to ignore the law, there’s not much they can do about it.

One could argue that this is a bad idea because banks can come back and re-set a hearing, with live testimony (after entry of Final Judgment) and at that point they’ll have more attorneys’ fees to tax because we made them come back for another hearing. In theory, that’s true. But let me ask you this – how often do you think they’ll actually re-set another hearing? Once the bank gets a final judgment of foreclosure, do you think they’re going to bother coming back into court, for a separate hearing, with their expert, to present testimony about a few thousand dollars in attorneys’ fees? Before you answer, bear in mind – often, the bank’s attorney, as well as the fee “expert,” are in a separate part of the state and will do anything possible to avoid having to travel to a hearing. Perhaps better yet, Florida law typically does not permit attorneys to recover fees for the time spent traveling to a hearing, particularly an out-of-town hearing. With this in mind, let me ask again – if you successfully prevent the inclusion of attorneys’ fees in a final judgment of foreclosure, do you really think two lawyers are going to travel across the state for an in-person hearing to try to tack on a few thousand dollars in attorneys’ fees? I sure don’t. That’s a big reason why I file objections to fee awards by affidavit, as set forth above.

Mark Stopa

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American Politicians are Prostitutes for the Banks

Naked Capitalism has a great article on how American politicans, from Obama on down, are prostituting themselves for the interests of big banks.  Sound harsh?  Consider this …

Two separate investigations, one by Fortune, the other by the New York Post, ascertained that an overwhelming majority of foreclosures took place when the banks failed to demonstrate that they had the right to do so. Banks have foreclosed illegally on servicemen, and have also foreclosed on people who didn’t have mortgages. There is ample evidence that they have systematically violated their own contracts, the agreements that govern mortgage securitizations, and have on a widespread basis charged impermissible fees to borrowers. And when these junk and pyramiding fees precipitate foreclosures, the servicers have effectively ripped off investors too. They have tooth and nail fought every effort that would help borrowers if it in any way impinged on their profits, even though their very survival is the result of taxpayer munificence. Finally, they’ve made a mess of property records in this country.

Those aren’t my thoughts – that’s a quote from the article.  But the point isn’t to recap the banks’ horrible misgivings; the point is to show that despite these nefarioius acts, American politicans are so corrupt they’re unwilling to do anything about it.  I’ve talked at length about the absence of prison sentences, monetary restitution, or any type of sanction whatsoever, but that’s only part of the story.

Remember how, in months past, the Attorneys General from each of the 50 states have spoken with varying degrees of conviction about the need for big banks to be punished for the frauds they’ve perpetrated on homeowners and the public at large?  For instance, Iowa Attorney General Tom Miller made headlines promising a thorough investigation and punishment for the banks.  Through time, though, the AGs have all softened – to the point that we now hear virtually nothing about this.  Why?  It’s a simple explanation, really.  The big banks have bought off politicians, from President Obama on down, by paying millions of dollars in campaign funds.  Call it whatever you want – bribery, corruption, prostitution – it’s awful. 

Most recently, New York’s Attorney General, Eric Schneiderman, has come under pressure from President Obama to back off his demands that the banks enter a fair settlement.  It’s as if Obama is saying:

Don’t you know how this game is played?  Big banks pay us, and we do what they want.

Here’s the take from Naked Capitalism …

It is high time to describe the Obama Administration by its proper name: corrupt.

Admittedly, corruption among our elites generally and in Washington in particular has become so widespread and blatant as to fall into the “dog bites man” category. But the nauseating gap between the Administration’s propaganda and the many and varied ways it sells out average Americans on behalf of its favored backers, in this case the too big to fail banks, has become so noisome that it has become impossible to ignore the fetid smell.

The Administration has now taken to pressuring parties that are not part of the machinery reporting to the President to fall in and do his bidding. We’ve gotten so used to the US attorney general being conveniently missing in action that we have forgotten that regulators and the AG are supposed to be independent. As one correspondent noted by e-mail, “When officials allegiances are to El Supremo rather than the Constitution, you walk the path to fascism.”

Revealingly, one of the Administration’s allies said: “Wall Street is our Main Street.” And the worst is that this remark may not be a cynical Ministry of Truth pronouncement. Team Obama bears all the hallmarks of being so close to banks and big corporations that it has lost all contact with and understanding of mainstream America.

The latest example is its heavy-handed campaign to convert New York state attorney general Eric Schneiderman to a card carrying member of the “be nice to our lords and masters the banksters” club. Schneiderman was the first to take issue with the sham of the so-called 50 state attorney general mortgage settlement. As far as the Administration is concerned, its goal is to give banks a talking point and prove to them that Team Obama is protecting their backs in a way that the chump public hopefully won’t notice.

The Administration joined this effort to hurry it forward and assure it resulted in a suitably financier-friendly outcome. And it has done so despite recent HUD inspector general’s audits finding that the five biggest servicers were defrauding taxpayers. We’ve heard not a peep of follow up on that front; instead, the Administration keeps leaking its tired “A settlement is just around the corner” story.

Schneiderman is far from the only person to see what a sellout this “settlement” is. The basic premise of a settlement is to obtain some sort of restitution to induce a prosecutor/plaintiff to drop a current or likely lawsuit. For the aggrieved party to get a good settlement, it needs to have a credible case, as in facts (a smoking gun or two) and a legal theory as to why those facts mean the perp is in hot water.

Aside from robosigning, which was all over the funny papers last year, the Administration and the AGs have made sure they have no facts. A member of the Administration who was involved in the settlement talks confirmed what we have long said on this blog: there was no investigation of any kind, despite Iowa attorney general Tom MIller’s lies claims to the contrary. They didn’t even bother getting to first base, namely making document requests.

And that is why at least some of the AGs are so uncomfortable with what is going on. Even though Gretchen Morgenson of the New York Times focuses tonight on the Administration’s efforts to leash and collar Schneiderman, he isn’t alone in having significant reservations. Beau Biden of Delaware is also making a broad-ranging investigation, which is inconsistent with entering into a settlement. Martha Coakley of Massachusetts and Catherine Masto of Nevada also have initiatives underway that are at odds with a settlement, and neither one looks interested in reversing course. We’ve also been told the Colorado AG may opt out of the deal.

And a story in the Wall Street Journal tonight suggests that this horse has already left the barn and is in the next county. Tellingly, Lisa Madigan, the Illinois AG, who is a political weathervane and was working closely with Tom Miller, has come forward and indicated she’ll at most support only a qualified release from liability, when the banks want a broad release. The article indicates that her view is shared by a fair number of the AGs. Per the Journal (hat tip reader Deontos):

“They wanted to be released from everything, including original sin,” said a U.S. official involved in the discussions. The legal protection sought by the banks included loan origination; securitization and servicing practices; fair-lending procedures; and their use of the Mortgage Electronic Registration Systems, an industry-owned loan registry that often acts as an agent for owners of mortgage loans…

“Those of us at the table…have maintained this investigation is about robo-signing and loss-mitigation problems,” Illinois Attorney General Lisa Madigan said in an interview. “The release should be narrowly drafted to cover those issues.”

If the AGs stick to this stance, there is no deal. The article maintains the AGs still want damages of $20 to $25 billion. The banks aren’t going to pay much if anything to settle on robosigning, and the AGs haven’t done the legwork to make a case on loss mitigation.

So the bullying of Schneiderman looks to be misguided, since the settlement is likely to fall apart. But it is nevertheless germane because it reveals the Administration’s warped thinking and sense of priorities. As we’ve said, the Administration’s decision to cast its lot with the banks in early 2009 dictated its course of action:

Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

Morgenson shows how this plays out:

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement…

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

Yves here. So get this: we have unemployment at roughly 16% if you include discouraged workers, and many “employed” workers are underemployed. The housing market hasn’t bottomed; experts have pushed their hopes estimates from 2011 to 2012. And continued concerns about unaddressed chain of title issues may well impede any housing recovery.

Yet rather than address real, serious problems, senior administration officials are instead devoting time and effort to orchestrating a faux grass roots campaign to con a state AG into thinking his supporters are deserting him because he has dared challenge the supremacy of the banks.

So how does the Administration rationalize its failure to do anything effective? It goes deeper into its propaganda hall of mirrors:

Mr. Donovan said…“our view is we have the immediate opportunity to help a huge number of borrowers to stay in their homes, to help their neighborhoods and the housing market.”

This doesn’t even qualify as competent three card monte. “No, don’t look at what we are trying to do for the banks. Really, all we care about is homeowners!”

Marcy Wheeler, who has more patience for this vomititious tripe than I do, explains why Donovan’s assertion does not pass the credibility test:

You see, the Administration has an “immediate opportunity to help a huge number of borrowers stay in their homes,” without any action from Eric Schneiderman. They have a way to do so more swiftly, in such a way the servicers actually would be held accountable It would involve offering refis with principal reductions to all the underwater homeowners whose loans are owned by Fannie and Freddie. That would not only help a huge number of borrowers stay in their home, but it would be massive stimulus.

But instead they’re sending Donovan to pressure Schneiderman to pursue a measure that would benefit far fewer homeowners and probably take more time, while putting the last nail in the coffin of the rule of law in this country.

Finally, to the toad-hopping-out-of-mouth utterance, “Wall Street is our Main Street.” That came from finance’s favorite camp follower, Kathryn S. Wylde. As we described in an earlier post, she’s wiling to throw the rule of law under the bus to serve the interests of the banks who happen to be major funders of the business-promoting not for profit she heads. And she is also a director of the New York Fed. So it should not be surprising that she got in a “contentious conversation” with Schneiderman when they crossed paths in public.

Her argument, as she recounted it to the Times, is intellectually and morally bankrupt:

[I]it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street — love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.


In this state, banks count for a lot, and therefore your job it to make their problems go away. You don’t seem to understand that you are supposed to act like a proper bought and paid for public official. Your role is to support big companies. You are to go after them only when the things they do make the public so angry that you have to help us make a credible show that the elites care about the little people.

If you think that is an unfair rendition of Wylde’s remark, consider the damage the major banks have done. They have failed so badly at being competent lenders and record keepers that when judges in New York demand that bank attorneys certify that they have taken reasonable steps to verify documents submitted to the courts, foreclosures grind to a near halt. Two separate investigations, one by Fortune, the other by the New York Post, ascertained that an overwhelming majority of foreclosures took place when the banks failed to demonstrate that they had the right to do so. Banks have foreclosed illegally on servicemen, and have also foreclosed on people who didn’t have mortgages. Their is ample evidence that they have systematically violated their own contracts, the agreements that govern mortgage securitizations, and have on a widespread basis charged impermissible fees to borrowers. And when these junk and pyramiding fees precipitate foreclosures, the servicers have effectively ripped off investors too. They have tooth and nail fought every effort that would help borrowers if it in any way impinged on their profits, even though their very survival is the result of taxpayer munificence. Finally, they’ve made a mess of property records in this country.

But apparently none of this, in the eyes of Ms. Wylde, rises to the level of being worth remedying, much the less “indefensible”. Given the ample of evidence of malfeasance, we must reach one of two conclusions. One is that she has no idea what is going on and therefore can be ignored as being not competent to opine. The other is that no amount of economic harm to individuals rates as being worth pursuing in her eyes. It appears that the only thing that might rise to the level of being “indefensible” is damage to life and limb, so all white collar crimes are exempt. This is a classic totalitarian, “might makes right,” argument.

And mind you, Wylde allegedly represents “the public” on the New York Fed’s board. With friends like this, who needs enemies?

Felix Salmon wrote today of a global crisis of institutional legitimacy, and although his tour started with Libya, it focused mainly on Europe and the US. If you want to know why the governed are withdrawing their consent in advanced economies, you need look no further than toadies like Donovan and Wylde who defend institutionalized profiteering and seek to undermine the few like Schneiderman who’ve managed, despite the odds, to get in a position where they might be able to do something to reverse it.

If you are a New York resident, I hope you’ll call (800 771-7755 begin_of_the_skype_highlighting              800 771-7755      end_of_the_skype_highlighting or 212 416-8000 begin_of_the_skype_highlighting              212 416-8000      end_of_the_skype_highlighting) or e-mail Schneiderman and thank him for standing up to the corruption of the banks and their enablers in the Administration. I think he will appreciate the show of support.

Clearly, they’ve all been bought off, to varying degrees, by the big banks they’re supposed to be investigating. 

Want more proofthat’s not the point.  The point of the article is to show that despite these horrible misdeeds by big banks, American politicians have prostituted themselves to the interests of big banks.

Mark Stopa

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Monopoly.  A classic childhood board game.  The object, of course, is to own as much real estate as possible, build houses, and bankrupt your opponents. 

Sounds a little bit like what the banks are doing nowadays, eh?  This cartoon is spot-on.

Mark Stopa

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What’s Happening in Foreclosure Cases?

Florida just revealed these statistics on the adjudication of foreclosure cases in the past year, and I’m pleasantly surprised.  More than 104,000 foreclosure cases were dismissed in Florida in the past 12 months – greater than the number of summary judgments that were entered over this same time period. 

That’s terrific news.  It proves there are ways to reduce the backlog of foreclosure cases in Florida courts without entering summary judgments and throwing homeowners on the streets. 

Know what else jumps out at me?  The number of trials.  198.  That’s 198 trials in the entire year, across the entire state.  As I see it, that’s a glaring sign that banks don’t want to go to trial in foreclosure cases.  What does that mean for homeowners?  Just what I’ve been saying for years now – fight your case, force the banks to prove their entitlement to a foreclosure in court, force them to go to trial, and you may give yourself leverage to get a settlement/resolution that you can live with.  Heck, you might even prompt a bank to dismiss the case. 

Kim Miller of the Palm Beach Post just wrote a story on this issue; here it is.

Florida’s courts cleared 201,524 foreclosure cases from its backlog with the help of an additional $6 million from lawmakers, but more than half of the cases were dismissals possibly initiated by banks needing to redo faulty paperwork.

The statewide foreclosure backlog in the courts now stands at 260,815 cases, a 43 percent reduction from June 2010, according to a report from the Office of the State Courts Administrator.

Palm Beach County’s foreclosure backlog shrank 49 percent, from 46,438 cases to 23,725.

“Overall, I thought the reduction was reasonable in light of everything that happened,” said Palm Beach County Chief Judge Peter Blanc, referring to a bank-initiated foreclosure moratorium in the fall and subsequent slowdown after paperwork problems were recognized. “It’s a fine balance because if we go too quickly, we’re criticized for being a rocket docket; if we go too slow, we’re not efficiently using our resources.”

In 2010, facing a growing backlog of more than 462,000 foreclosure cases statewide, the legislature gave Florida’s courts a one-time allowance of $6 million to hire additional judges and case managers. An additional $3.6 million was awarded to clerks’ offices to process the increased paperwork.

The money started flowing July 1, 2010, and ended June 30 .

Of the cases cleared during the year, 96,630 were disposed in a final judgment that likely sent the home to a foreclosure auction; 198 went to trial; 570 were either consolidated into another case, transferred or are unidentified; and 104,126 were dismissed .

A dismissal can occur if a case is settled, possibly during court-ordered mediation; if a judge orders it; or through a voluntary motion made by the bank.

Unless otherwise ordered by a judge, a dismissed foreclosure case can usually be refiled.

“This is good news that proves there are ways to resolve foreclosure cases without a summary judgment,” said Mark Stopa, a Tampa-based foreclosure defense attorney. “The bad news is that most of these dismissals were not dismissals on the merits, but were banks deciding to drop the case or the bank being too slow to prosecute its case or retain new counsel.”

As many as 100,000 foreclosures statewide were left in limbo this year when the Plantation-based Law Offices of David J. Stern closed without officially withdrawing as counsel.

Stern’s firm, once the largest bank representative in the state, lost most of its clients in the fall following allegations that his employees forged documents, improperly notarized paperwork and hid flawed files from auditors. The firm has denied the allegations.

Stern’s former cases were transferred to new attorneys, but in the process may have been dismissed if it couldn’t be determined who was representing the bank.

Also, defense attorneys said they’ve seen banks dismiss cases right before trial because of faulty paperwork.

“We had five cases dismissed the week before trial at the end of June,” said Ron Kaniuk, a Boca Raton-based foreclosure defense attorney. “The banks weren’t ready. They didn’t have their paperwork ready.”

Kaniuk said he’s concerned that too many cases were rushed through the courts by judges under pressure to clear dockets with the additional state money.

“It was money well spent for the banks and the courts, but not for Floridians and homeowners,” he said.

No additional money was awarded this year to handle the still weighty foreclosure backlog.

With more foreclosures predicted, Blanc said he’s cobbled together a schedule with one full-time foreclosure judge and others who help out one day a week.

Broward County, which was left in June with a 27,748-case backlog, also is down to one full-time foreclosure judge.

“I think there’s no doubt it’s a large number,” Broward County Chief Judge Peter Weinstein said of the backlog. “We have people calling all day with problems and questions, and we don’t have the staff anymore to take care of it.”

Mark Stopa

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Is the SEC Covering Up Wall Street Crimes?

A handful of reporters in this country have done a fantastic job bringing to light various travesties of justice on foreclosure-related issues – Shannon Behnken of the Tampa Tribune, Kim Miller of the Palm Beach Post, multiple reporters from the St. Pete Times, and David Streitfeld of the New York Times, to name a few.  

One of my personal favorites is from what could be deemed a pretty odd source – Rolling Stone Magazine.  Matt Taibbi of Rolling Stone has written several articles now that should make every American wonder: 

What the hell is going on in the U.S. Government?

Taibbi’s lastest masterpiece, titled Is the SEC Covering Up Wall Street Crimes?, is a must-read.  Yes, it’s lengthy, but it is very insightful, shedding light on the question many of us have wondered for a long time:

Why has nobody been punished for financial crimes that ruined the U.S. economy?

The incestuous relationships between the big banks and the regulatory agencies that enforce them is laid out again in this article.  It’s so disgusting, in my view, that I think a Presidential candidate for 2012 could emerge with just one platform:

Eradicating the corrpution in Wall Street and the incest between the big banks and the agencies charged with enforcing them.

If that sounds crazy, think about how much money our country would save if banks didn’t have free reign to commit financial crimes without penalty.  When I read Taibbi’s article, it made me wonder why the SEC even exists.  If that sounds harsh, you tell me – why are SEC officials terminating criminal investigations into big banks, then leaving their SEC jobs for high-paying positions with those very banks?  Does that sound like justice to you, or a horribly perverted, incestuous mockery of justice? (For details, please, read the article.)

Our financial system has run amuck, and it’s past time somebody stood up to do something about it.  And that somebody should be someone other than a reporter for a rock-and-roll magazine.  Presidential candidates … Congressmen … the floor is yours.

Mark Stopa

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Foreclosure Affects Everyone

Years ago, foreclosure carried a negative stigma.  Homeowners facing foreclosure didn’t want to talk about their predicament out of fear of embarassment, not wanting to be viewed as a ”deadbeat.”  Now?  Things have certainly changed. 

Foreclosure is so pervasive, affecting everyone from all walks of life, that the stigma is gone, if not entirely, then almost entirely. 

Why the change in perception?  I see two reasons.  First, the mainstream media has shown the public, over and over again, how banks are slimier than pigs in a mud pit on a rainy day.  Suddenly, as far as foreclosures go, homeowners aren’t the ones with the negative stigma.  It’s now OK to openly discuss foreclosure, as I’ve seen by the creation of various on-line support groups in recent months. 

Second, the public has begun to realize that foreclosure affects everyone.  Unlike years ago, it’s not just the unemployed or disabled – it’s rich and poor; millionaires and unemployed; black, white, and Hispanic; old and young; blue collar and white collar; … everyone. 

I know this from my own experiences, having represented doctors, lawyers, judges, engineers, and countless other professionals. 

Want more proof?  Burt Reynolds is facing foreclosure on his Florida home

We’re not talking about some D-list celebrity hack who made a movie once.  We’re talking about Burt Reynolds. 

If you’re facing foreclosure, don’t be embarassed.  Foreclosure affects all walks of life.  Instead, hold your head high, hire a lawyer, and fight to protect your rights.

Mark Stopa

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Florida’s Proposed “Fair Foreclosure Act” (cough, gag)

I try to make this blog a fresh and entertaining (to the extent that’s possible in the foreclosure crisis) mixture of my own, personal views on foreclosure and political issues and emerging news stories.  In other words, I strive to give my own insights in this blog and not to merely parrot/copy information from other sources. 

That said, I like the thoughts of foreclosure defense attorney Chip Parker, out of Jacksonville, who wrote the following (which I couldn’t have said better myself): 

If the mortgage industry has its way, the passage of a new bill floating around Tallahassee will ensure that Floridians will be displaced from their homes without legal representation or due process.  In typical Orwellian style, this bill is entitled the Fair Foreclosure Act – it’s anything but . . .

Florida often makes the national news when it comes to foreclosures, and it’s never positive.  According to a recent 24/7 Wall Street study, three of the ten housing markets most likely to collapse in 2012 are in Florida.  Naples, Miami and Ft. Lauderdale all make the top 10, and the rest of the Sunshine State isn’t far behind.

In its preamble, the FFA actually says, “Once suit has been filed, the public interest is served by moving foreclosure cases to final resolution expeditiously in order to get real property back into the stream of commerce.”  Of course, it is this glut of foreclosed homes flooding the real estate market that has all but ensured its collapse.  REO properties typically sell far below market value, and when so many REOs exist, it drives the overall market to new lows.  The vicious cycle is complete as more homeowners suffer increased losses from a down market.

So the bill’s stated purpose is flawed right from the outset, but getting our homes back into the “stream of commerce” really isn’t the purpose of the Fair Foreclosure Act.  Its sole design is to take Floridians’ property without due process or equal protection under the law.

Florida has a proud history of whoring for the mortgage industry, and while states across the country are fighting to restore honor and integrity to our judicial system, Florida has taken a different approach.  In Florida, the Supreme Court and our elected state officials are doing what they can to ensure their benefactors . . . the banks . . . get what they want.

Remember Foreclosure Court?   It unconstitutionally employed retired senior judges to act as mortgage mercenaries – ramrodding defective foreclosures through the judicial system despite national ridicule.  I am actually shocked it fell victim to Governor Scott’s massive spending cuts.  That must have been a mistake.

Then, with the addition of Pam Bondi as our new Attorney General, the mortgage industry took firm control of our prosecutors as well.  Ms. Bondi all but killed any investigation into foreclosure fraud, and fired two assistant prosecutors who gained national attention for piecing together a massive conspiracy by the mortgage industry to defraud our state court judges in foreclosure cases.

BUT, these acts of treason pale in comparison to the Fair Foreclosure Act, which proposes to do the following:

  • Where the amount of principal and interest equals or exceeds 120% of the just value of the home, it will allow the mortgage company to foreclose without going through the judicial process.  That means no foreclosure complaint, no defense, no due process, no justice.  It will be as easy to take your home as it is to repo a car.
  • It will repeal Florida Statutes § 57.105, which awards attorney fees to homeowners who successfully defeat mortgage companies in court.  At the same time, it assesses attorney fees against a homeowner and his lawyer (in equal parts) if the mortgage company prevails.  The design here is to stop consumer lawyers from taking any more foreclosure cases by making it impossible to make money and even personally expose the lawyer to penalties.  Consumer lawyers will have no upside potential and all downside risk.
  • It will eliminate the right of a homeowner to set aside a wrongful foreclosure, even if the plaintiff committed fraud in the process of taking the home.  The ONLY recourse would be awarding money damages.  This language is to appease the title companies by retroactively ratifying all that foreclosure fraud that has taken place over the last decade.  Once the bank takes your home, you’ll never get it back, no matter what.

The typical knee-jerk response is always that these homeowners are people who “got in over their head.”  But such banking propaganda ignores the fact that 1 in 2 houses in Florida have no equity.  So, according to bankers, half of Floridians are irresponsible homebuyers. Wall Street and greedy bankers created this horrible mess, but they want no part of shared sacrifice in cleaning it up.  Middle class America didn’t cause this problem, and Middle class America shouldn’t pay for it.

We Floridians suffer from foreclosure fatigue, and the FFA will send us all over the edge.

Mark Stopa

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