A Slap on the Wrist for Mortgage Servicers

While negotiations continue between mortgage servicers and the Multistate Mortgage Foreclosure Group, enforcement action has been taken by the Office of the Comptroller (OCC), the Office of Thrift Supervision (OTS), and the Federal Reserve Board (FRB) against 14 U.S. bank and two third-party mortgage servicers.

Amid allegations of unsafe and unsound practices in the processing of foreclosures, enforcement action has been taken against bank servicers: Ally Financial, Aurora Bank, Bank of America, Citibank, Citigroup, EverBank, HSBC, JP Morgan Chase, MetLife Bank, OneWest Bank, PNC, Sovereign Bank, SunTrust Bank, U.S. Bank, and Wells Fargo and third-party servicers: Lender Processing Services Inc. (LPS), and MERSCORP also known as Mortgage Electronic Registration Systems Inc. (MERS).

“These comprehensive enforcement actions, coordinated among the federal banking regulators, require major reforms in mortgage servicing operations,” said acting Comptroller of the Currency John Walsh. “These reforms will not only fix the problems we found in foreclosure processing, but will also correct failures in governance and the loan modification process and address financial harm to borrowers. Our enforcement actions are intended to fix what is broken, identify and compensate borrowers who suffered financial harm, and ensure a fair and orderly mortgage servicing process going forward.”

As part of the enforcement action by the OCC, OTS and FRB, servicers must significantly improve residential mortgage loan servicing and foreclosure processing.  This includes borrower communication and “dual-tracking,” which will prohibit foreclosure during the loan modification process. 

Mortgage servicers are also required to promptly correct deficiencies in residential mortgage loan servicing that were identified by examiners in reviews conducted during the fourth quarter of 2010. 

Each mortgage servicer must, among other things, submit plans acceptable to the FRB that:

►Strengthen coordination of communications with borrowers by providing them with the name of the person who is their primary point of contact at the servicer;

►Ensure that foreclosures are not pursued once a mortgage modification has been approved, unless repayments under the modified loan are not made;

►Establish robust controls and oversight over the activities of third-party vendors that provide residential mortgage loan servicing, loss mitigation, or foreclosure-related support, including local counsel in foreclosure or bankruptcy proceedings;

►Provide remediation to borrowers who have suffered financial injury as a result of wrongful foreclosures or other deficiencies identified in their review of the foreclosure process; and

►Strengthen their programs to ensure compliance with state and federal laws regarding mortgage servicing and the processing of foreclosures.

“This settlement provides that if you’re negotiating or in the midst of a trial modification, a lender is prohibited from seizing the property,” says Carlos J. Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale.  “Defense attorneys now have a basis to go forward to try and save a property in litigation with the additional argument that failing to modify or settle is a breach of the lender settlement with federal regulators.”

The enforcement action is based upon an OCC, OTS and FRB review of foreclosure practices that found mortgage servicers “failed to conform to state legal requirements.”  The review stopped short at robo-signing and other forms of document fraud.  It did not investigate the illegal imposition of fees, the failure to comply with loan modification requirements or other alleged servicer abuses.  In fact, federal regulators only reviewed a small sample of loan files containing key information on foreclosure practices.

Many believe that the settlement by federal regulators will undermine the investigation of foreclosure fraud by the Multistate Mortgage Foreclosure Group.  Initially, there were hopes of a “global settlement” covering state and federal regulators, but the agencies, led by the OCC, broke off and delivered their own enforcement action.  

While federal regulators and the various state attorneys general maintain this enforcement action will not affect the AG probe or ongoing negotiations, mortgage servicers can now report they have been punished for alleged violations of law.  Although an independent review is determining damages, they may reject any additional settlement since they have already been punished by their regulators.

To review Bill Lewis’ entire consumer protection series, please visit http://www.williamlewis.us.

William E. Lewis Jr. & Associates is a solutions based professional consulting firm specializing in the discriminating individual, business or governmental entity.  To learn more, tune into The Credit Report with Bill Lewis, weekdays at 9 o’clock on AM 1470 WWNN.

Foreclosure defense: Process servers allegedly filing false affidavits

Recent reports indicate that approximately 462,339 foreclosure cases were pending in Florida as of June 30. Following foreclosure moratoriums by Ally Financial, Bank of America, J.P. Morgan Chase, and PNC Bank, the settlement of deceptive marketing charges by Wells Fargo, and the Attorney General’s investigation into faulty foreclosure practices at the Florida Default Law Group, the Law Offices of David J. Stern, P.A.; the Law Offices of Marshall C. Watson, P.A.; and Shapiro & Fishman, LLP, investigators have turned up a new problem. Process servers are now alleged to have filed false affidavits in support of personal service in foreclosure matters. Foreclosure defense attorneys claim to have documented a number of cases where process servers filed false affidavits. While investigating the law firms that employed “robo-signers,” state investigators are also closely examining service of process in a number of cases. Recent foreclosure defense cases allege homeowners never received a court summons even though they still occupied their home, while others allege that process servers did not take the required steps to locate them or filed false affidavits about whom or when they delivered papers. According to the lawsuits, some process servers violated rules related to the personal delivery of legal papers. Like robo-signing foreclosure documents without reviewing them for accuracy, a number of homeowners are now alleging they were never served with foreclosure papers. Once rare, “bad service” of process has become more common as lenders and their attorneys speed thousands of foreclosure cases through “rocket dockets” that are designed to clear an ever growing backlog. “With the foreclosure debacle, it’s become more complicated,” says Carlos J. Reyes, a foreclosure defense attorney with the Reyes Law Group in Fort Lauderdale. “For the sake of expediency, process servers are being rushed. As they are paid by the piece, they have an interest in earning a higher income.” Homeowners involved in foreclosures are required to receive a summons and complaint personally delivered by a process server. Repeated attempts at personal service are required before court permission can be obtained to publish a legal notice in the alternative. Some process servers have allegedly cut corners. One recently claimed she could not find a homeowner facing foreclosure on a second home, despite conducting extensive record checks. This held true even though the foreclosure complaint clearly provided a primary home address in Connecticut. Lenders and attorneys typically contract their summons delivery work to large process serving firms, who sub-contract to private independent servers. In her deposition to state investigators, former Stern paralegal Tammie Lou Kapusta, testified that summons serving procedures were a “complete mess,” with homeowners routinely complaining they never received papers. She and another former employee, Kelly Scott, said their managers told them move forward with the foreclosures anyway. Investigators also questioned staff at Stern’s firm regarding billing practices that involved serving multiple parties at an address and billing for each one. “Good service of process is crucial”, Reyes said. He has heard of homeowners losing their home because they never received a summons and missed filing dates or court hearings. While a court summons must be accepted by an adult, state law does not require it to be served upon the property owner. No one has to sign, verifying receipt, “which makes it easier to say the person was served, when they weren’t,” Reyes said. Laws governing the service of process vary from state to state. In Florida, there is no statewide licensing or regulating body for process servers, and rules vary greatly among the 20 judicial circuits. Among the largest with operations in ten states is Tampa-based ProVest. Although ownership interest by the law firms has been denied, they maintain support staff at the Law Offices of David J. Stern and Shapiro & Fishman in Boca Raton. Marshall C. Watson also uses ProVest. While ProVest declined to comment on specific cases, company president James Ward stated they “utilize properly licensed or authorized independent contractors” and require them to “fully comply with state and local guidelines.” To learn more about the mortgage foreclosure crisis or to file a complaint with the Attorney General’s Office, visit their website at www.myfloridalegal.com or call (866) 9-NO-SCAM (866-966-7226). Source:  The Credit Report with Bill Lewis – Highlands Today, an edition of the Tampa Tribune (Media General Group) – http://www2.highlandstoday.com/content/2010/nov/07/foreclosure-defense-process-servers-allegedly-fili/ To review Bill Lewis’ entire consumer protection series at the Highlands Today, visit www.williamlewis.us. William E. Lewis Jr., is a credit repair expert with Credit Restoration Consultants and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

Strategic Foreclosure 101 – Walking Away From Your Home

Many Americans are wondering how to deal with an underwater mortgage in these tough economic times.  Florida has been hit harder by the housing crisis than any other state in the nation. While some can afford to continue making payments on their home, many across the state have been pushed into foreclosure as home values have decreased anywhere from 15 to 55 percent or more.

Aside from a loan modification, we have all heard the terms foreclosure, short-sale, and deed-in-lieu of foreclosure. Each of these terms spells trouble for the homeowner – loss of home, reduced credit score, and negative social stigma. Although lenders in February filed fewer foreclosure actions in Florida compared to a year earlier, a new strategy is on the horizon, an idea coined “strategic foreclosure.”

If you purchased your home at the peak of the real estate market from 2004 to 2006, your value has substantially dropped. Although irrelevant to some borrowers as they can afford the payment and plan on residing in their home for a decade or more, others have simply stopped paying in the hope of forcing a short-sale or reduction in principal.

Should you walk away from your mortgage even if you can afford to pay? Millions of Americans are asking themselves that same question. Some borrowers feel they have a legal, moral, and ethical obligation to make payments notwithstanding a substantial drop in value. With almost half of the residential mortgages in Florida underwater, a growing number of individuals are contemplating walking away from the place they call home.

If you can resolve yourself to possible litigation and a lower credit score for several years, walking away may be a smart business decision. Right now, only a small percentage of borrowers are contemplating this technique. A recent study, though, found that approximately 32 percent of homeowners nationwide would consider walking away from their mortgage if the value of their home continues to decrease.

While “strategic foreclosure” makes perfect economic sense, many homeowners do not choose this course of action out of shame, guilt and fear. Underwater homeowners continue to stress over their mortgage payments to avoid the consequence of foreclosure and a perceived negative social stigma within the community. This is especially so when a borrower has the financial ability to pay.

Although almost 17.4 million homes nationwide are underwater, one must consider the adverse implications of “strategic foreclosure” before walking away. First, and foremost, is the loss of your home. Have you purchased the home across the street at half the amount of your current mortgage? Do you plan on renting? Are you aware that a “strategic foreclosure” will have the same impact on your credit score as a loan modification, judicial foreclosure, short-sale, or deed-in-lieu of foreclosure? Are you aware that you can be sued for any deficiency balance on your home?

“Borrowers who are underwater on their mortgages would be better off financially if they walked away from their homes,” says Scott Kleiman, a foreclosure defense attorney with Kalis & Kleiman. “They don’t because of their moral and ethical obligation to pay their mortgages.”

Borrowers who had a good credit history before they walk away through “strategic foreclosure” can usually rebuild their good name and reputation within a couple of years. In a recent study commissioned by the global information services company Experian, approximately 588,000 borrowers nationwide simply walked away from their homes in 2008. This is up 128 percent over 2007. From all indications, 2010 will be a banner year as the social stigma of foreclosure and simply walking away from your home will have dissolved amid the mortgage meltdown.

Just like former “Beverly Hills 90210” star Brian Austin Green – who has advanced a “strategic foreclosure” strategy in an effort to short-sale his $2 million Hollywood Hills home – you too can ride the wave of the future.

As a homeowner, you can afford to make your mortgage payments but are underwater to the point of no return. As a borrower, the American dream of owning a home is lost as it will maintain negative equity for a decade or more. “Strategic foreclosure” may be the first step toward a short-sale and walking away from yourhome.

http://www2.highlandstoday.com/content/2010/mar/14/lc-strategic-foreclosure-101/columns-welewisjr/

William E. Lewis Jr. & Associates is a solutions based professional consulting firm specializing in the discriminating individual, business or governmental entity. To learn more, tune into “The Credit Report with Bill Lewis,” a daily forum for business and financial news, politics, economic trends, and cutting edge issues on AM 1470 WWNN.

Loan Modification Licensure in Florida – an Industry no Longer Without Regulation

The days of simply opening up shop and starting a loan modification business have come to an end in Florida. Individuals or businesses providing loan modification services must now be licensed as a mortgage broker by the Florida Office of Financial Regulation (OFR) in order to conduct business.

The Florida Legislature recently passed Senate Bill SB 2226. This law makes significant changes to Florida’s mortgage brokerage law — Chapter 494, Florida Statutes — effective Jan. 1, 2010. In particular, the new law specifically covers negotiation of existing loans as being part of the duties of a mortgage broker. Any individual or business attempting to negotiate a loan mortgage modification will now be required to obtain a license through OFR. Additionally, there are new disclosures required in order to perform a loan modification — large type print on contracts and a three day rescission period are among a few of the changes.

The new law also requires “loan originators” to obtain a license. Prior to the amended law, there was a large loophole that allowed salaried employees of a mortgage broker to act as loan originators and still receive compensation for bringing a borrower and lender together. Although this section of the law phases in on October 1, 2010, hundreds of individuals have submitted applications to the OFR to become compliant.

The new law was sparked by hundreds of complaints filed with the state attorney general’s office in Tallahassee. While only 59 complaints were filed in 2008, the number skyrocketed to approximately 3,750 in 2009, according to Florida Attorney General Bill McCollum, who recently appeared on the Credit Report with Bill Lewis on AM 1470 WWNN.

In an effort to combat the rampant increase in foreclosure rescue scams within an industry previously unregulated, General McCollum sued three foreclosure rescue firms — and the attorneys who worked for them — alleging that they charged advance “qualifying payments” as high as $1,299 to perform loan modifications in violation of state law. Filed in Miami-Dade County Circuit Court on December 17, 2009, the suit also claims the company required clients to establish escrow accounts for additional fees and deceived them by implying the money was for legal representation.

After receiving numerous complaints — the majority originating from consumers outside Florida — the attorney general began investigating Kirkland Young LLC in July, 2009. State regulators soon realized that the business was affiliated with ABK Consultants Inc. and Attorney Aid LLC, which were also named in the suit. Although located in Miami-Dade, the businesses solicited customers nationwide. The legal action seeks to shut down the three companies, a $10,000 fine for each violation of state law, as well as restitution for consumers scammed in the process. Although in receivership, Kirkland Young has also been sued by the Federal Trade Commission.

Through Jan. 31, 2010 South Florida ranks fourth in the nation for home loan modifications, with 37,451 under President Barack Obama’s Making Home Affordable Program. Nationwide, 24 percent of the 3.3 million homes with distressed loans have been modified, according to a U.S. Department of the Treasury report. While the new law is not going to eliminate loan modification scams completely, it should make them more difficult. In 2009, the Mortgage Fraud Task Force was handling more than 200 cases of loan modification fraud. In 2008, the South Florida field office of the FBI had the second-highest number of mortgage fraud reports in the country with 5,155 reported instances.

For more information or to file a complaint, visit Attorney General Bill McCollum’s Web site at www.myfloridalegal.com.

William E. Lewis Jr., is a credit repair expert and host of “The Credit Report with Bill Lewis” on AM 1470 WWNN, a daily forum for business and financial news, politics, economic trends, and cutting edge issues.

http://www2.highlandstoday.com/content/2010/feb/07/loan-modification-licensure-florida-industry-no-lo/columns-welewisjr/