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Mortgage Meltdown: “Entire Industry Is A Scam,” Says NY AG As Subpoenas Go Out To 14 Loan Modification Firms; “Intent To Sue” Sent To Another

June 11, 2009

Bloomberg News reports:

  • New York Attorney General Andrew Cuomo subpoenaed 14 loan-modification companies and plans to sue [another] as part of a probe of the “foreclosure rescue” industry.(1) [...] “Many of these companies charge upfront fees which are specifically prohibited by law,” Cuomo said in a conference call. “Sometimes homeowners even end up paying a higher cost after one of these companies gets involved.” Cuomo said that in many ways the “entire industry is a scam” because the U.S. Department of Housing and Urban Development provides assistance to struggling homeowners for free.

For the story, see Cuomo Subpoenas 14 Loan Modifiers, Plans Lawsuit.

See also: New York AG press release, see Cuomo Announces Intent To Sue ‘Amerimod’ Loan Modification Company In Investigation Of Foreclosure Rescue Scams Targeting Homeowners Nationwide (Long Island-Based American Modification Agency Charged Illegal Up-Front Fees and Used Deceptive Marketing to Target Homeowners Facing Foreclosure; Cuomo Also Issues Subpoenas to Fourteen Other Loan Modification Companies Across the Country in Nationwide Investigation).

(1) According to the NY AG’s office, it has served a notice of intent to sue on American Modification Agency, Inc. (“Amerimod”) and its owner and President Salvatore Pane, Jr., accusing the company of charging illegal upfront fees and using false advertising to reel in struggling homeowners. Amerimod is headquartered in Uniondale, NY and claims to operate in all 50 states, servicing thousands of consumers nationwide.

Cuomo has also issued subpoenas to fourteen loan modification companies: American Home Recovery Corporation; CloseMore Financial Corporation; Elite Results Group, Inc.; FLM Law Center LLP, a/k/a Federal Loan Modification Law Center and Federal Loan Modification; Hometown U.S.A., Inc.; Global Modifications, Inc. a/k/a The Law Office of Brett Margolin, P.C.; Loan Modification Affiliate Exchange, Ltd, a/k/a LoanMAE; Nationwide Modification Agency, Inc.; NMA Legal Services, P.C.; Northeast Mortgage Services; People’s First Financial, Inc.; Raymond Lewis & Fitch, Inc.; Settled For Less, Inc.; and the Law Depot, Inc. a/k/a the Loss Mitigation Legal Network.

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Subprime Peddlers at it Again: Countrywide Vets Look To Score Big Profits Buying, Fixing, Reselling Bad Loans

June 11, 2009

The San Francisco Chronicle reports:

  • Can folks who made millions peddling subprime loans use that same Midas touch to mint money from the housing market downturn? Former top executives from Countrywide Financial, once the nation’s largest mortgage firm and a poster child for loose lending standards, have launched a company to buy distressed mortgages from banks and the government at a discount, modify the loans so borrowers can afford them and pocket the profits from reselling them.


  • The fact that some architects of subprime lending now hope to profit from the crisis spawned by the practice doesn’t sit well with many. “It is sort of like the arsonist who sets fire to the house and then buys up the charred remains and resells it,” Margot Saunders of the National Consumer Law Center in Washington told the New York Times. Times columnist Gail Collins was more graphic. “It’s like Jeffrey Dahmer selling body parts to a clinic,” she wrote.
  • Ironically, PennyMac’s approach could benefit struggling homeowners, which has consumer advocates offering cautious compliments. Most banks and investors who own mortgages still seem to find foreclosure preferable to so-called workout solutions; homeowners continue to report that their pleas for loan modifications fall on deaf ears. But PennyMac’s business model is predicated on trying to keep people in their homes.
  • Since PennyMac plans to buy toxic loans at pennies on the dollar - and is buying whole mortgages, not ones sliced and diced into securities owned by multiple investors - it has the liberty to slash homeowners’ monthly payments and even the principal they owe.


  • PennyMac’s “model suggests the great promise of an aggressive modification strategy; creating win-win opportunities for borrowers and investors,” said Paul Leonard, director of the California office in Oakland for the Center for Responsible Lending. Still, he added: “It’s hard to overlook the fact that these are Countrywide veterans who no doubt contributed to some of the sophisticated schemes to sell bad loans to borrowers and make great profits, who are now finding profitable ways of fixing those loans.”

For more, see Former subprime lenders stand to profit again.

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June 2, 2009

Although we have published prior articles on this subject on this blog, we continue to receive calls from borrowers who have been told by others that they should “file bankruptcy to stop a foreclosure”. In fact, an attorney who I sought to establish a local counsel relationship with in another state e-mailed me yesterday asking “has your client considered filing bankruptcy to stop the foreclosure?” Once again, as we have stated before and as provided by applicable Bankruptcy law, filing Bankruptcy does not, repeat does not, “stop” foreclosure. It only temporary postpones the process.

Pursuant to 11 USC sec. 362(a), an “automatic stay” is imposed on all proceedings against the person filing bankruptcy when the Bankruptcy petition is filed. This would include any attempted foreclosure, which may be in the form of a foreclosure lawsuit (in a “judicial” foreclosure state) or a scheduled Trustee’s sale (in “non-judicial” foreclosure states). As such, when a person files bankruptcy, any foreclosure proceeding is temporarily halted (but is not permanently “stopped”).

There is a provision in the Bankruptcy laws which permit the foreclosing party to obtain what is called “relief from stay” by the filing of a simple Motion in the Bankruptcy which, when granted (which such Motions almost always are) permits the foreclosing party to resume the foreclosure process outside of the Bankruptcy. As such, the borrower is now left with both (a) having to defend the foreclosure anyway, and (b) all of the consequences of a Bankruptcy (including long-term consequences to the borrower’s creditworthiness, having to surrender credit cards, etc.).

As such, we do not advise clients to “file bankruptcy to avoid foreclosure” because filing bankruptcy does not permanently stop foreclosure nor does it “make the foreclosure go away”. In fact, for most borrowers (whose only real issue is the foreclosure), filing bankruptcy may simply complicate matters and leave the borrower in a worse position than if they simply defended the foreclosure.

Jeff Barnes, Esq.


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Mortgage Meltdown: Wells Whistleblowers Call Lending Practices “Riding The Stagecoach To Hell” In Testimony Admitting To Targeting Blacks In Baltimore City Lawsuit

June 2, 2009

In Baltimore, Maryland, The Daily Record reports:

  • The city of Baltimore has beefed up its groundbreaking racial discrimination lawsuit against Wells Fargo with sometimes shocking testimony from a pair of the megabank’s former subprime-loan officers. The two whistleblowers claim their co-workers targeted black ZIP codes and churches, used software to “translate” marketing materials into African-American vernacular, and referred to subprime loans in minority communities as “ghetto loans” and to borrowers as “mud people.”
  • Their declarations were attached to an amended complaint filed Monday in U.S. District Court in Baltimore. The loan officers, who worked for Wells Fargo in the Baltimore-Washington area from the late 1990s until 2007, also alleged bank employees deceptively steered prime borrowers into subprime loans for their own financial benefit and joked that they were “riding the stagecoach to Hell.”
  • The city also filed declarations from four city residents who live near Wells Fargo’s foreclosed properties. They complained of squatters, rats and burst pipes, all of which have required attention from some city department. It cites 10 studies, including one specific to Baltimore, which studied reverse-redlining in black neighborhoods; and updated the foreclosure data to include the first part of 2009.

For more, see Ex-workers allege race-based loan approach at Wells Fargo.

Go here, Go here, and Go here for other posts on alleged discrimination in real estate transactions.

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foreclosure defense: New Housing Law Protects Tenants Nationwide Against Being Blindsided By Surprise Foreclosure Evictions

May 26, 2009

The Associated Press reports:

  • Buried in a housing law signed [last] week by President Barack Obama are protections that will help thousands of renters stay in their homes — at least for awhile — after their landlord has been foreclosed on.
  • The law allows tenants to remain in their foreclosed rentals through the end of their lease and then 90 days after that before being forced to vacate by the lender. Renters without leases will have 90 days, a significant improvement over what most received before: almost no notice at all. “Until this law was enacted, there had been no national protections for any of these households,” said Linda Couch, deputy director at the National Low Income Housing Coalition. “This gives renters time to adjust their lives.”

For more, see Law protects renters from foreclosure evictions.

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Foreclosure Offense: Cleveland Housing Court Judge Slams Brakes On All Wells Fargo Foreclosure Sales Within City; Lender Accused Of Dumping Blighted Homes

May 26, 2009

In Cleveland, Ohio, The Plain Dealer reports:

  • Cleveland Housing Court Judge Raymond Pianka on Thursday ordered Wells Fargo Bank to temporarily stop selling any foreclosed homes it owns in the city. A housing-advocacy group sought the temporary restraining order, saying that Wells Fargo has expanded its practice of dumping vacant and deteriorated homes for paltry sums without first doing repairs. Wells Fargo and Cleveland Housing Renewal Project Inc., a subsidiary of Neighborhood Progress Inc., are to be in Pianka’s court [this] week for a hearing to consider whether Wells Fargo properties should be declared public nuisances and be repaired or demolished before they can be sold. The group estimates the order could cover as many as 183 properties.

For more, see Wells Fargo Bank blocked from selling foreclosed homes in Cleveland by Housing Court Judge Raymond Pianka (if link expires, try here).

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Mortmage Meltdown: C. Florida Court Opts For “Rubber Stamp Method” In Effort To Bulldoze Undefended Foreclosures Thru Legal System, Despite Myriad Of Paperwork Errors

May 21, 2009

In Sarasota, Florida, the Sarasota Herald Tribune reports:

  • Starting Friday, hundreds of people could lose their property each month in foreclosure hearings scheduled to take less than two minutes. Often called a “rocket docket,” the streamlined foreclosure court can schedule up to 250 cases per day, sending properties to auction in cases where the owners never showed up to defend themselves.
  • Speeding those cases through the court system will help unclog a glut of foreclosure cases, allowing civil judges to focus on cases where homeowners are fighting to save their property, as well as the other lawsuits they normally oversee. [...] “I don’t want to have these undefended cases stacking up,” 12th Circuit Chief Judge Lee Haworth said. “It just seemed to be the right thing to do.”


  • Foreclosure defense attorneys, who have seen case after case where lawyers representing banks are giving false statements in court, worry that some homeowners will slip through the cracks and lose property they should not. [...] A retired attorney living in Sarasota, whose study of 180 Sarasota County cases found only one in four had complete paperwork, said the fast docket leaves less time to catch those kinds of mistakes. “There is no check, no screen, to make sure the most obvious, egregious errors are corrected,” Richard Kessler said. “It’s not a hearing, it’s a hanging.”
  • Haworth said the system puts the burden on the person being foreclosed on to point out any flaws there may be in the case against them. “If they decide for whatever reason they choose not to defend it, then they are defaulted,” he said.

For more, see Two minutes, and home goes away.

For story update, see ‘Rocket docket’ for foreclosures begins.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here.

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Foreclosure Fraud: MERS Jammed In Attempt To Foreclose In 27 Cases; Not A Real Party In Interest, Lacked Standing, Failed To Produce Note, Says Nevada Bankruptcy Judge

May 21, 2009

In Las Vegas, Nevada, Las Vegas Business Press reports:

  • A Las Vegas bankruptcy judge has dealt a blow to an obscure but critical piece of the mortgage enforcement machinery that could slow foreclosures. After a rare hearing in front of three judges last year that initially encompassed 27 cases, U.S. Bankruptcy Court Judge Linda Riegle has ruled that the Mortgage Electronic Registration System (MERS) could not represent lenders seeking to foreclose on delinquent homeowners already in bankruptcy unless it could produce the actual loan note. This goes to the heart of how home lending has evolved over the past two decades, with a loan rarely staying on the books of the originator but often being sold several times to other institutions or investment groups. As a result, producing a loan document is far more complex than opening a drawer in a filing cabinet.


  • Riegle’s ruling not only parsed federal and state law but at least implicitly rapped MERS on the knuckles for its practices. For example, she noted that MERS acted as the attorney on several loans in Las Vegas even after they were transferred to non-MERS members. She also rejected the argument that lenders who belong to MERS and designated it to be their legal representative should be good enough for the court. Without the loan papers, she concluded, MERS’ terms and conditions for its members do not give it any rights to foreclose under Nevada law.” To reverse an old adage,” she wrote, “if it doesn’t walk like a duck, talk like a duck and quack like a duck, then it’s not a duck.”

For more, see Judge’s ruling deals blow to national mortgage servicer.

For the judge’s ruling, see In re Mitchell.

For posts that reference the failure of mortgage lenders and their attorneys to file the proper paperwork when bringing foreclosure actions, Go Here, Go Here, Go Here, Go Here, Go Here, Go Here, and Go Here. E

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Foreclosure Defense: Obama Administration Big Shots On The War On Foreclosure Rescue, Loan Modification Scams

April 14, 2009

U.S. Treasury Secretary Timothy F. Geithner, Attorney General Eric Holder, and Secretary of Housing and Urban Development Shaun Donovan issued a joint press release last week on combating foreclosure rescue and loan modification scams:

  • [I]n a major step [last] week, the Department of the Treasury, the Department of Justice, the Department of Housing and Urban Development and the Federal Trade Commission announced a new joint effort that cuts across federal and state governments and the private sector to combat foreclosure rescue scams. Led by the Treasury’s Financial Crimes Enforcement Network, this effort creates an advanced targeting process to streamline investigations and prosecutions and provides financial institutions with a new advisory to spot and report questionable loan modification schemes.
  • For American homeowners, this means that fraudulent companies will be shut down more quickly; companies that otherwise would have gone unnoticed will be identified and investigated; and the government’s ability to identify and prosecute anyone involved in mortgage rescue scams will be bolstered.

For more, see Crackdown on fraud.

See also, The Washington Post: ‘We Will Find You and We Will Punish You’:

  • There was tough talk out of Washington [last week] aimed at loan-modification scammers. Attorney General Eric Holder had this message for people and companies ripping off homeowners on the verge of foreclosure: “If you prey on vulnerable homeowners with fraudulent mortgage schemes, or discriminate against borrowers, we will find you and we will punish you.”

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Mortgage Meltdown: More Mortgage Lending Insiders Blow The Whistle On Shady Subprime Loan Practices

March 23, 2009

Dateline NBC ran a story last night in which it:

  • [G]ets to the bottom of how bad loans and greed wrecked the U.S. economy in this hour-long investigation. Hear from Countrywide insiders and whistleblowers who have never spoken publicly before.

For the story, see ‘If you had a pulse, we give you a loan’ (Inside the fiasco that led to the mortgage mess and Countrywide’s collapse) (read story) (watch video).

Go here for Dateline NBC home page.

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