Foreclosure Offense: NY AG Scores Big Win As Supremes Reverse Lower Courts, Give Go-Ahead To States To Pursue Probes Of National Banks For Lending Discrimination

The Wall Street Journal reports:

  • In a surprise win for state regulators over the banking industry, a divided U.S. Supreme Court on Monday gave New York prosecutors the green light to investigate national banks for lending discrimination. The high court, in a 5-4 opinion by Justice Antonin Scalia, said federal banking regulations didn’t pre-empt the ability of states to enforce their own fair-lending laws.
  • The ruling was a win for the New York attorney general’s office, which had been seeking to investigate the banks’ residential real-estate lending practices since 2005.(1) Scalia said New York Attorney General Andrew Cuomo couldn’t issue executive subpoenas to the banks but could bring enforcement actions against them in court. The decision was a surprise because decades of U.S. Supreme Court rulings have favored federal banking regulation at the expense of state regulation. […] Cuomo said the ruling “reaffirms the vital role state attorneys general play in protecting consumers from illegal and improper practices by our country’s biggest and most powerful banks.”

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  • The divided ruling didn’t split along the court’s normal ideological lines. Justice Clarence Thomas, whose views often align with Scalia’s, wrote the court’s dissent.(2)

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  • All of the other 49 states backed New York in the case, saying they have historically had the power to enforce consumer-protection laws against national banks. That power, the states said, was particularly important now because of the widespread mortgage abuses that contributed to the nation’s economic crisis.

For the whole story, see US High Court: States Can Probe Natl Bank Lending (subscription required; if no subscription, try here, then click link for the story).

For the court’s ruling, see Cuomo v. Clearing House Assn., L.L.C., Docket # 08-453 (June 29, 2009).

(1) According to the story, former New York Attorney General and Governor Eliot Spitzer launched the probe, saying mortgage data showed black and Hispanic borrowers received a larger percentage of high-interest home loans than white borrowers. Spitzer asked several banks, including Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc., to voluntarily produce non-public information about their mortgage-lending practices in New York. In response, the federal Office of the Comptroller of the Currency and a consortium of national banks each sued to block Spitzer’s investigation.

(2) Justice Scalia was actually the swing vote in this ruling, aligning himself with Justices Stevens, Souter, Ginzburg, and Breyer, the four justices on the court widely considered to be politically “left of center”. DiscriminationPredatoryLendingAlpha

For the whole story, see US High Court: States Can Probe Natl Bank Lending (subscription required; if no subscription, try here, then click link for the story).

For the court’s ruling, see Cuomo v. Clearing House Assn., L.L.C., Docket # 08-453 (June 29, 2009).

(1) According to the story, former New York Attorney General and Governor Eliot Spitzer launched the probe, saying mortgage data showed black and Hispanic borrowers received a larger percentage of high-interest home loans than white borrowers. Spitzer asked several banks, including Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc., to voluntarily produce non-public information about their mortgage-lending practices in New York. In response, the federal Office of the Comptroller of the Currency and a consortium of national banks each sued to block Spitzer’s investigation.

(2) Justice Scalia was actually the swing vote in this ruling, aligning himself with Justices Stevens, Souter, Ginzburg, and Breyer, the four justices on the court widely considered to be politically “left of center”.

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

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.

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

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.

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  • 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.

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  • 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.

TRUTH BE TOLD: FILING BANKRUPTCY DOES NOT “STOP” FORECLOSURE

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.

www.ForeclosureDefenseNationwide.com

e-mail: [email protected]

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

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.