Foreclosure Fraud

FTC Proposes Rule That Would Bar Mortgage Relief Companies from Charging Up-Front Fees

specialaudience — Thu, 11 Feb 2010 16:02:22 +0000

The Federal Trade Commission moved to protect distressed homeowners from the promoters of bogus foreclosure rescue and mortgage modification services by proposing a new rule that would forbid companies to charge up-front for these services. Instead, companies could only collect payment after providing services.

According to the Notice of Proposed Rulemaking announced today, historic levels of consumer debt, increased unemployment, and an unprecedented downturn in the housing and mortgage markets have contributed to high rates of mortgage loan delinquency and foreclosure. This mortgage crisis has launched an industry of companies purporting, for a fee, to obtain mortgage loan modifications or other relief for consumers facing foreclosure.

Mortgage Electronic Registration Systems (MERS) And Foreclosures

specialaudience — Fri, 05 Feb 2010 20:54:35 +0000

In many foreclosures, the Mortgage Electronic Registration Systems (MERS) is involved. Originally designed to track servicing rights and ownership of mortgage loans in the United States, MERS is a private company and not a financial institution. MERS serves as the mortgagee of record for lenders, investors and their loan servicers for over 60 million mortgages. MERS claims its process eliminates the need to file assignments in the county land records, a maneuver the New York Times estimates has saved banks more than $1 billion over the last decade

But some judges, and some mortgage analysts, see MERS as more of a corporate cloak. The New York Times story quotes a a mortgage analyst consulting on foreclosure cases as saying

“I’m convinced that part of the scheme here is to exhaust the resources of consumers and their advocate. This system removes transparency over what’s happening to these mortgage obligations and sows confusion, which can only benefit the banks.”

MERS has only a few employees. It is, after all, just a complex database. So who does all the “work” for foreclosures, assignments, and such? Lenders, title companies, and foreclosure companies, etc. become “member” of MERS. An employee at the rim is then designated a “Corporate Officers” of MERS awith the title of Assistant Secretary or Vice President. This has led to the appearance of conflict. New York State Supreme Court Judge Arthur M. Schack of Brooklyn wrote in a 2008 case, Judge Schack observed that in recording an assignment, the same person acted both as a Vice President of MERS and as the servicing agent of the assignee (HSBC Bank USA, N.A. v. Candida Valentin, 2008 NY SlipOp 52167 (U), 21 Misc. 3d 1124 (A)). In another case, Judge Schack noted that the same person [Erica Johnson-Seck] signed an Affidavit as Vice President of MERS and 28 days later as an officer of DEUTSCHE BANK.

Is Mortage Servicing Just A ‘Kansas City Shuffle?’

specialaudience — Fri, 05 Feb 2010 19:47:00 +0000

In a recent series, Fraud Digest reports that Assignments are often missing critical documents in foreclosure documents.

Foreclosure Document Mills

Despite the hundreds of thousands of foreclosure cases, there are “very few cases where the issue of the authenticity of documents, particularly Assignments, has been raised.” This causes a problem for a lender, because they then can’t prove it owns the mortgage note. Without this proof, the lender has no right to foreclose. Inexperienced homeowners facing foreclosure may have no idea fabricated documents are being used. Ironically, its been judges in many cases who challenge these documents.

With the rush on foreclosures, judges are often in the unique position to see hundreds, if not thousands, of Assignments, and compare the names, job titles, and even notary information on the Assignments.

Lost Assignments

Most homeowners are familiar with this story. The original lender has a note secured by a mortgage and sells to a second lender. The second lender sells to a third and so on. A mortgage can easily change hands five or six times – especially in the recent melt-down marketplace. If just one lender failed to record a sale (assignment), then the chain of possession is broken. During a typical title search, this descrepency may be detected, and the appropriate (sometimes lengthy and expensive) steps are taken to correct this mistake and “reconnect the chain.” Unfortunately, during a foreclosure an unethical person may choose a shortcut.

Key foreclosure documents fabricated

specialaudience — Fri, 05 Feb 2010 19:17:14 +0000

In thousands of foreclosure cases, key documents may have been fabricated by employees of mortgage servicing companies who have falsely held themselves out as bank officers. Because most foreclosures are the result of defaults, the validity of these assignments has most often gone unchallenged. Almost three million U.S. properties were involved in some form of foreclosure action in 2009, a 44% increase from the end of 2008 to the end of 2009. In 2010, the issue of the validity of Assignment is likely to finally come under examination by regulators, courts, lawyers and distressed homeowners.

Foreclosure Fraud Seminars

specialaudience — Fri, 05 Feb 2010 19:12:08 +0000

Recently, the Pinellas County Department of Justice and Consumer Services delivered the first of four foreclosure fraud seminars.

Len Ciecieznski, community outreach coordinator for the Pinellas County Communications Department, warned that scammers are now taking advantage of homeowners receiving demand letters from their lenders or the lenders’ lawyers. Scammers promise people who have fallen behind on their mortgage that they can save their home through special deals they have with lenders. Unfortunately, these scam artists end up with their victim’s money – or even their house. Worse, the victims can lose their house but still owe on their mortgage.

Homeowners in Pinellas can go to http://www.pinellascounty.org/foreclosure/ for more information on upcoming seminars.