Friday, November 12, 2010

Matt Taibbi: Courts Helping Banks Screw Over Homeowners | Rolling Stone Politics

Matt Taibbi: Courts Helping Banks Screw Over Homeowners | Rolling Stone Politics: "The mortgages that are being foreclosed upon have no real owners. The lawyers bringing the cases to evict the humans have no real clients."

Sunday, October 10, 2010

Pitfalls of Mandatory Foreclosure Mediation

In Florida, lenders are requesting the full disclosure of private financial information from borrowers prior to mediation, yet the lenders furnish no information regarding their financial stability. Normally, personal financial disclosure is given during discovery in aid of execution after a judgment has been rendered.

This is true in Nevada, as well, under the foreclsoure mediation rules. Under the promise of transparency and information symmetry, borrowers are invited to provide just about every item necessary for the lender to evaluate how collectible an eventual deficiency judgment may be. And what must the lender provide? Well, according to the law, all of its loan documents, verification of their authenticity and a chain of title to the loan, and an authorized representative available to negotiate an extra-judicial settlement.

And what comes first, the chicken or the egg? The borrower can be disqualified from mediation if he is untimely, inaccurate or misleading in submitting his financial information. After the borrower complies, what happens if the lender is not equally forthcoming? So far, the Nevada program reports no penalties being imposed for lender noncompliance.

Sunday, September 19, 2010

Fair Game - When Mortgage Mediation Is a Gamble -

Fair Game - When Mortgage Mediation Is a Gamble -

Published: September 18, 2010
Nevada’s foreclosure mediation program completed 4,212 cases in its first year. But some mediators who have participated in it, as well as some lawyers for borrowers, say it has flaws.

Wednesday, May 26, 2010

Loan Modification Denied—Now What?

Loan Modification Denied—Now What? New Short Sale Guidelines Under HAFA (Home Affordable Foreclosure Alternatives) Program

Because so many million homeowners across the United States are struggling to make their mortgage payments and facing foreclosure, the US Treasury Department under Making Home Affordable implemented the Home Affordable Foreclosure Alternatives Program (HAFA).

Effective April 5, 2010, HAFA offers incentives to homeowners, investors, and loan servicers to complete a short sale or deed in lieu of foreclosure. The incentives for homeowners include receiving $3,000 in relocation costs and avoiding foreclosure.

Not all homeowners qualify. The HAFA program applies to homeowners who:

1. do not qualify for a trial mortgage modification under the Making Home Affordable

2. do not successfully complete the trial period for their modification;

3. miss at least two consecutive payments during their modification period; or

4. request a short sale or deed-in-lieu of foreclosure.

In addition, the property must be the homeowners primary residence, the first mortgage must have been obtained prior to January, 2009, loans balances cannot exceed $729,750, and the homeowners’ monthly principal, interest, taxes and insurance must exceed 31% of their gross monthly income.

Mortgage servicers participating in the Making Home Affordable Program (HAMP) must evaluate homeowners for a Home Affordable Modification before evaluating them for other options as well as implement the Home Affordable Foreclosure Alternatives Program (HAFA).

Some limitations under HAFA include the bank pre-approving short sale terms (the servicer can dictate price before the home can list it), the deficiency will be reported to the IRS, the servicer may still deny the short sale, VA and FHA loans are excluded, and investor properties are excluded.

For more information, visit the Making Home Affordable website or call a real estate attorney for more information.

At MALIKOWSKI LAW OFFICES, LTD., our Nevada attorneys offer free consultations to Nevada homeowners struggling to make their house payments and trying to decide what to do. Don’t be a victim: know your rights. Call a foreclosure attorney today to learn what options may be available to you. We may be able to help you stop foreclosure and help you know what options are available under HAFA, HAMP, Making Home Affordable, and debt defense.

Saturday, April 3, 2010

Beat the Press Archive | The American Prospect

Beat the Press Archive | The American Prospect

Does Anyone Who Writes on Housing for the NYT Know Arithmetic?

When people talk about plans to "help" homeowners they must (yes, I said "must") ask two simple questions:

1) Are the homeowners being "helped" paying less in mortgage and other housing costs than they would to rent a comparable unit: and

2) Are the homeowners likely to end up with equity in their homes?

Wednesday, January 20, 2010


This title may be cited as the ‘Protecting Tenants at Foreclosure Act of 2009’.


(a) In General- In the case of any foreclosure on a federally-related mortgage loan or on any dwelling or residential real property after the date of enactment of this title, any immediate successor in interest in such property pursuant to the foreclosure shall assume such interest subject to--

(1) the provision, by such successor in interest of a notice to vacate to any bona fide tenant at least 90 days before the effective date of such notice;

(2) the rights of any bona fide tenant, as of the date of such notice of foreclosure--

(A) under any bona fide lease entered into before the notice of foreclosure to occupy the premises until the end of the remaining term of the lease, except that a successor in interest may terminate a lease effective on the date of sale of the unit to a purchaser who will occupy the unit as a primary residence, subject to the receipt by the tenant of the 90 day notice under paragraph (1);

(B) without a lease or with a lease terminable at will under State law, subject to the receipt by the tenant of the 90 day notice under subsection (1),

except that nothing under this section shall affect the requirements for termination of any Federal- or State-subsidized tenancy or of any State or local law that provides longer time periods or other additional protections for tenants.

(b) Bona Fide Lease or Tenancy- For purposes of this section, a lease or tenancy shall be considered bona fide only if--

(1) the mortgagor or the child, spouse, or parent of the mortgagor’ after ‘mortgagor’.Page 80, line 20, strike ‘or’ and insert ‘and’.Page 80, line 23, insert ‘ under the contract is not the tenant;

(2) the lease or tenancy was the result of an arms-length transaction;

(3) the lease or tenancy requires the receipt of rent that is not substantially less than fair market rent for the property or the unit’s rent is reduced or subsidized due to a Federal, State, or local subsidy.

(c) Definition- For purposes of this section, the term ‘federally-related mortgage loan’ has the same meaning as in section 3 of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2602).

Tuesday, January 19, 2010

Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses

Anatomy of a Government-Abetted Fraud: Why Indymac/OneWest Always Forecloses

What is going on with Indymac/One West? Why aren’t they doing loan modifications? This article will try and bring together the known facts for a better understanding of the situation, and discuss what the Indymac situation means for foreclosures in general — and the government’s response to the crisis. First, to understand the situation today, one must have an understanding of the recent history of Indymac.

Indymac was a national bank in the U.S. It was insured by the FDIC. On July 11, 2008, Indymac failed and was taken over by the FDIC.

Indymac offered mortgage loans to homeowners. A large number of these loans were Option ARM mortgages using stated income programs. The loans were offered by Indymac retail, and also through Mortgage Bankers would fund the loans and then Indymac would buy them and reimburse the Mortgage Banker. Mortgage Brokers were also invited to the party to sell these loans.

During the height of the Housing Boom, Indymac gave these loans out like a homeowner gives out candy at Halloween. The loans were sold to homeowners by brokers who desired the large rebates that Indymac offered for the loans. The rebates were usually about three points. What is not commonly known is that when the Option ARM was sold to Wall Street, the lender would realize from four to six points, and the three point rebate to the broker was paid from these proceeds. So the lender “pocketed” three points themselves for each loan.

When the loans were sold to Wall Street, they were securitized through a Pooling and Servicing Agreement. This Agreement covered what could happen with the loans, and detailed how all parts of the loan process occurred.

Even though Indymac sold off most loans, they still held a large number of Option ARMs and other loans in their portfolio. As the Housing Crisis developed and deepened, the number of these loans going into default or being foreclosed upon increased dramatically. This reduced cash and reserves available to Indymac for operations.

In July, 2008, the FDIC came in and took over Indymac. The FDIC looked for someone to buy Indymac and after negotiations, sold Indymac to One West Bank.
OneWest Bank and its Sweetheart Deal

OneWest Bank was created on Mar 19, 2009 from the assets of Indymac Bank. It was created solely for the purpose of absorbing Indymac Bank. The principle owners of OneWest Bank include Michael Dell and George Soros. (George was a major supporter of Barack Obama and is also notorious for knocking the UK out of the Euro Exchange Rate Mechanism in 1992 by shorting the Pound).

When OneWest took over Indymac, the FDIC and OneWest executed a “Shared-Loss Agreement” covering the sale. This Agreement covered the terms of what the FDIC would reimburse OneWest for any losses from foreclosure on a property. It is at this point that the details get very confusing, so I shall try to simplify the terms. Some of the major details are:

* OneWest would purchase all first mortgages at 70% of the current balance
* OneWest would purchase Line of Equity Loans at 58% of the current balance.
* In the event of foreclosure, the FDIC would cover from 80%-95% of losses, using the original loan amount, and not the current balance.

How does this translate to the “Real World”? Let us take a hypothetical situation. A homeowner has just lost his home in default. OneWest sells the property. Here are the details of the transaction:

* The original loan amount was $500,000. Missed payments and other foreclosure costs bring the amount up to $550,000. At 70%, OneWest bought the loan for $385,000
* The home is located in Stockton, CA, so its current value is likely about $185,000 and OneWest sells the home for that amount. Total loss for OneWest is $200,000. But this is not how FDIC determines the loss.
* ‘FDIC takes the $500,000 and subtracts the $185,000 Purchase Price. Total loss according to the FDIC is $315,000. If the FDIC is covering “ONLY” 80% of the loss, then the FDIC would reimburse OneWest to the tune of $252,000.
* Add the $252,000 to the Purchase Price of $185,000, and you have One West recovering $437,000 for an “investment” of $385,000. Therefore, OneWest makes $52,000 in additional income above the actual Purchase Price loan amount after the FDIC reimbursement.

At this point, it becomes readily apparent why OneWest Bank has no intention of conducting loan modifications. Any modification means that OneWest would lose out on all this additional profit.

Note: It is not readily apparent as to whether this agreement applies to loans that IndyMac made and Securitized but still Services today. However, I believe that the Agreement does apply to Securitized loans. In that event, OneWest would make even more money through foreclosure because OneWest would keep the “excess” and not pay it to the investor!
Pooling And Servicing Agreement

When OneWest has been asked about why loan modifications are not being done, they are responding that their Pooling and Servicing Agreements do not allow for loan modifications. Sheila Bair, head of the FDIC has also stated the same. This sounds like a plausible explanation, since few people understand the Pooling and Servicing Agreement. But…
Parties Involved

Here is the”dirty little secret” regarding Indymac and the Pooling and Servicing Agreement. The parties involved in the Agreement are:

* The Sponsor for the Trust was…………Indymac
* The Seller for the Trust was……………Indymac
* The Depositor for the Trust was……… guessed it………….Indymac
* The Issuing Entity for the Trust was……………….(drumroll)……………….Indymac
* The Master Servicer for the Trust was……..once again………Indymac

In other words, Indymac was the only party involved in the Pooling and Servicing Agreement other than the Ratings Agency who rated these loans as `AAA’ products.

To make matters worse, Indymac wrote the Agreement in order to protect itself from liability for these garbage loans. By creating separate Indymac Corporations — which the Depositor, Sponsor, and other entities were — Indymac created a bankruptcy-remote vehicle that could not come back to them in terms of liability. However, they did not count on certain MBS securities and portfolio loans coming back to bite them and force them under.

Now, the questions become:

* If Indymac was responsible for Securitization at every step in the Process, and was responsible for writing the Pooling and Servicing Agreement, can they be held accountable for the loans that they are foreclosing on?
* Since Indymac was the Issuing Entity, can they actually modify loans, but refuse to do so because they can make money for OneWest Bank by refusing to do so?
* Does Indymac have to “buy back” the loan from the Indymac Trust in order to do a loan modification?

These are questions that I have no answer for. All I know is that at every step of the way, Indymac was involved in the process, and have taken steps to protect themselves from liability for loans that should never have been made.
Loan Modifications

As referred to earlier, the Agreement covers all aspects of the Securitization Process. With respect to Loan Modifications, the Agreement for Indymac INDA Mortgage Loan Trust 2007 – AR5, states on Page S-67:

Certain Modifications and Refinancings

The Servicer may modify any Mortgage Loan at the request of the related mortgagor, provided that the Servicer purchases the Mortgage Loan from the issuing entity immediately preceding the modification.

Page S-12 states the same “policy”:

The servicer is permitted to modify any mortgage loan in lieu of refinancing at the request of the related mortgagor, provided that the servicer purchases the mortgage loan from the issuing entity immediately preceding the modification. In addition, under limited circumstances, the servicer will repurchase certain mortgage loans that experience an early payment default (default in the first three months following origination). See “Servicing of the Mortgage Loans—Certain Modifications and Refinancings” and “Risk Factors—Risks Related To Newly Originated Mortgage Loans and Servicer’s Repurchase Obligation Related to Early Payment Default” in this prospectus supplement.

These sections would appear to suggest that the only way that OneWest could modify the loan would be as a result of buying the loan back from the Issuing Trust. However, there may be an out. Page S-12 also states:

Required Repurchases, Substitutions or Purchases of Mortgage Loans

The seller will make certain representations and warranties relating to the mortgage loans pursuant to the pooling and servicing agreement. If with respect to any mortgage loan any of the representations and warranties are breached in any material respect as of the date made, or an uncured material document defect exists, the seller will be obligated to repurchase or substitute for the mortgage loan as further described in this prospectus supplement under “Description of the Certificates—Representations and Warranties Relating to Mortgage Loans” and “—Delivery of Mortgage Loan Documents .”

The above section may be the key for litigating attorneys to fight Indymac. If fraud or other issues can be raised that will show a violation of the Representations and Warranties, then this could potentially force Indymac to modify the loan.

At this point, it becomes important to note that Indymac/OneWest signed aboard with the HAMP program in August 2009. Even though they became a part of the program, they are still refusing to do most loan modifications. Instead, they persist in foreclosing on almost all properties. And even when they say that they are attempting to do loan modifications, they are fulfilling all necessary requirements so that they can foreclose the second that they “decide” the homeowner does not meet HAMP requirements, — which, since they can make more money by foreclosing on the property, meets the HAMP requirements for doing what is in the best interests of the “investor”.

Why did Indymac even sign up for HAMP, if they have no intention of executing loan modifications? Clearly, just for appearances.
One Final Question

It now becomes incumbent upon me to ask one final question. The Shared-Loss Agreement states the following:

2.1 Shared-Loss Arrangement.

(a) Loss Mitigation and Consideration of Alternatives. For each Shared-Loss Loan in default or for which a default is reasonably foreseeable, the Purchaser shall undertake, or shall use reasonable best efforts to cause third-party servicers to undertake, reasonable and customary loss mitigation efforts in compliance with the Guidelines and Customary Servicing Procedures. The Purchaser shall document its consideration of foreclosure, loan restructuring (if available), charge-off and short-sale (if a short-sale is a viable option and is proposed to the Purchaser) alternatives and shall select the alternative that is reasonably estimated by the Purchaser to result in the least Loss. The Purchaser shall retain all analyses of the considered alternatives and servicing records and allow the Receiver to inspect them upon reasonable notice.

Such agreements are usually considered to be interpreted to the benefit of the homeowner, as with HAMP and other programs. In legalese, it is called “Intent”.

What was the “Intent” of the Shared-Loss Agreement? Was the intent to provide OneWest Bank solely with a profitable incentive to take over Indymac Bank? If so, then OneWest has been truly successful in every manner.

Or was the intent to offer to OneWest Bank a way to be compensated for losses for foreclosures, but with the primary goal to assist homeowners in trouble? If this was the intent, then OneWest has failed miserably in its actions. And if so, could OneWest be actionable by the Federal Government for fraud?

In fact the true “Intent” was to limit losses to the Treasury Department. Each and every loan modification done would save the Treasury, and the tax payer, from 80-95 cents on every dollar.

Since, technically, One West would get 5-20 cents of any savings, it should have been an incentive to use foreclosure alternatives. But the reality is that the quick turnaround on foreclosure seems to give OneWest a better return. As a result, OneWest appears to simply ignore the intent and just foreclose (as far as I can tell).

So, OneWest’s failure to modify loans may actually amount to fraud on the Treasury and US taxpayers.

I have presented the story of Indymac/OneWest and what is happening today. But the story does not end with OneWest. There are over 50 different lenders and servicers who have Shared-Loss Agreements executed with the FDIC. Each Agreement offers essentially the same terms. Though other Lenders do not appear to be acting as flagrantly as OneWest, they are all still engaging in the same actions.

What is the solution for this problem?

* For homeowners individually, the most successes are being achieved by borrowers who are getting knowledgeable attorneys who will not just threaten litigation, but are also willing to act and file the necessary lawsuits. That tends to bring OneWest Bank to the table.
* For the country as a whole, and homeowners in mass, the problem must be brought to the attention of your local Congress Critters. You must hold their feet to the fire. They must know that if they do not respond to what OneWest and other lenders are doing, then they are subject to being voted out of their nice and cushy Congressional Offices.

Will this be easy? No way. After all, the lenders have the money and the ears of Congress. But if we do not draw the line here, then in 10-15 years, the Banks will devise another plan to “loot” the economy, as they do every 10-15 years.

Sunday, January 17, 2010

Walk Away From Your Mortgage!

The Way We Live Now
Walk Away From Your Mortgage!
Published: January 10, 2010
Why should underwater homeowners behave any differently from banks?