In Texas we have noticed foreclosures in the name of MERS have suddenly become VERY rare.  We haven’t run across one in several months.

Does this mean MERS has vanished? 

Nope, but the mortgage servicers are downplaying the role of MERS and trying to shield MERS and themselves from the bright light.

This means you need to dig a little deeper to uncover really what is going on behind the curtain.

The article below from Reuters highlights MERS’ recent announcement to its members and 20,000+ “officers” that they need to leave out MERS’ name in foreclosure proceedings.

If you or someone you know is facing a mortgage hardship or foreclosure contact our office immediately.

- The Bank Slayer

Exclusive: Facing criticism, MERS cuts role in foreclosures

(Reuters) – MERS, the electronic mortgage registry that faces multiple investigations for its role in thousands of problematic foreclosure cases, changed its rules to lower its profile in court-supervised foreclosures.

MERS, a unit of Merscorp Inc. of Reston, Virginia, owns the computerized registry, Mortgage Electronic Registration Systems. Mortgage loan giants Fannie Mae and Freddie Mac and several of the largest U.S. banks established MERS in 1995 to circumvent the costly and cumbersome process of transferring ownership of mortgages and recording the changes with county clerks.

In rule changes announced to MERS members on July 21, the company forbade members to file any more foreclosure actions in MERS’s name.

It also required mortgage servicers to obtain mortgage assignments and record them with county clerks before beginning foreclosures.

Mortgage-loan servicers perform routine duties for the investment trusts that own pools of mortgages, including collecting mortgage payments and, when necessary, filing foreclosures.

Although these trusts are legally required to own the mortgages when they file to foreclose, the servicers in many cases did not obtain documents known as assignments on their behalf until weeks or months after launching a foreclosure action in court, a recent Reuters Special Report found. (link.reuters.com/kyb72s)

Since the collapse of the housing boom, many foreclosure cases were filed in MERS’s name, even though the registry doesn’t really own either the mortgage or the promissory note, the document which states the terms of the mortgage loan.

MERS’s role in foreclosure cases has made it a lightning rod in recent months in court decisions which have held that loan servicers’ use of the registry violates basic real estate and mortgage laws.

In the last week, state attorneys general in Massachusetts and Delaware have announced investigations of MERS, and several other states have broader inquiries into foreclosure practices that include MERS.

It is unclear how much the rule changes will help MERS with its legal problems.

Under the new rules, servicers are required to stop filing foreclosures in MERS’s name, but MERS’s role in foreclosures won’t actually be eliminated. The servicers will continue to obtain the needed mortgage assignments from MERS. In past cases examined by Reuters, such assignments have included ones of questionable legitimacy, such as mortgages owned by now-defunct lenders.

O. Max Gardner III, a North Carolina lawyer who is specialist in foreclosure actions in bankruptcy courts, said the change will have the effect of making MERS’s role in assigning mortgages invisible in court.

The assignments will still come from MERS, but “they just won’t be in the court files any more,” he said.

MERS spokeswoman Janice Smith said the new rules make mandatory a trend that already was under way.

She noted that Fannie Mae, Freddie Mac and several large banks already had stopped filing foreclosures in MERS name. Smith said the change would avoid confusing homeowners facing foreclosure by eliminating MERS, a company they had never heard of, from court documents.

She also said that MERS’ s original purpose was to keep track of changes in servicers and mortgage ownership. “Foreclosure really was not central to MERS’s core business,” she said, adding that MERS received no income from foreclosures.

Mortgage-law specialists say that lenders and servicers for a long time relied heavily on bringing foreclosures in MERS’s name. This helped make possible foreclosures that otherwise might not have taken place because the necessary original documents were missing.

MERS says that it is the holder of record of 32 million, or 60 per cent, of U.S. mortgages. But it has only a handful of employees. Instead, it has designated some 20,000 employees of banks and other servicers as MERS “officers.”

Some courts and homeowners’ lawyers have criticized this system because in effect it enables servicers to assign mortgages to themselves whenever they needed one to foreclose.

The rule change also comes amid a growing movement against MERS among county clerks around the U.S. They have been pressing state attorneys general and local prosecutors to investigate MERS for allegedly failing to record documents with them and pay the associated filing fees. The rule change, by requiring servicers to record mortgage assignments sooner and pay recording fees, will partly address the clerks’ concerns.

(Editing by Michael Williams)

SHOCKER!!   Buyer of a short sale doesn’t own the property he just purchased (or does he?).  Seller of the short sale paid off the wrong party (or did he?).

The below email was sent to Neil Garfield at Living Lies.  Sadly this is not shocking at we know of two other lawsuits where the seller and the buyer acted in good faith and sold the property and the money was sent to BofA (and MERS was involved as well) and later the “real” owner of the deed of trust came forward and demanded that the transaction be undone due to a mistaken release of the deed of trust by the wrong party.

What does this mean to a real estate agent involved in the transaction?

Get an attorney involved – preferably BEFORE the short sale closes.  Why?  Quite simply you need to make sure that the transaction is buttoned up tight.   Many of the short sales that involve an attorney and litigation against the pretender lender will require a settlement agreement to be signed at closing (or at least have enough documentation that the seller & buyer have some ground to stand on).

But what does a settlement agreement do and how does it help you as the real estate agent?

First, the pretender lender whose is receiving the proceeds of the short sale “swears” they are the real lender or working for the real lender (like Fannie Mae).  Second, a well crafted settlement agreement will indemnify the seller (or whichever parties are named) – meaning that the lender getting the money has to defend the seller if they are sued over the specifics related to the settlement, i.e. the short sale.

Does the buyer lose the house and does the real estate agent have to give back their commission?

Very likely the answer is no.  But you will have to hire an attorney to fight this battle for you.   The title company should be on the hook for the value of the home – meaning they will either have to pay off the “real” lender or the new homeowner.   The downside is that it could cost more than the commission just to fight this type of suit AND the title insurance is only good for the amount of the policy (if the house was bought for less than full value or thousands of dollars in updates/remodeling has been performed you could lose this amount).

Bottom Line

Short sales and even purchasing foreclosure can be great equity and value builders for the buyers and assist the seller with disposing of a property but a good title company and good lawyer can help you keep this value hopefully keep your sanity and commission.

Seek legal counsel from a real estate attorney and one who has experience in dealing with short sale and foreclosure.

- The Bank Slayer

On the surface this looks like a win for the investors who lost billions when they bought lousy and in many cases FAKE mortgage backed securities.   But the question for Henry Homeowner who is wrestling with his own mortgage woes is, what does this mean to me?  Will I benefit from this “win”?

I have posted below comments and editorial from Neil Garfield @ LivingLies, Christine Riccardi @ Housing Wire, and a related post from the Subprime Shakeout website.

As far as my take…Let’s see the specific 530 RMBS to which this cases was pointed.  If your mortgage is inside (or was supposed to be inside) one of these allegedly held in Trust by the Bank of New York Mellon then you should have a leg up on BofA, as to your rights as a borrower and BofA as the servicer.  We’ll see.

- The Bank Slayer

NEIL GARFIELD COMMENTS & NOTE: The investors put up the money for the funding of mortgage transactions with BOA and other investment banking operations brokering the deal. Now BOA is about to pay the largest settlement to investors so far. The real question is that if the investors were the real creditors, which they were, then the obligation from borrowers should be prorated downward. If BOA is buying these pools that were never filled it doesn’t mean that the pools gain any more credibility as having the assets claimed for the pool than they had before.

And if BOA wants to move into the shoes of the investors they are faced with the same conundrum that the investors had when they decided to abandon claims against homeowners and seek redress from BOA, to wit: do they really want to move directly into the line of fire of a hail of defenses, affirmative defenses and counterclaims for predatory and fraudulent lending? And is there anyway that they can say that their claim was secured when the loans were never transferred by proper documentation or delivery?

This is a classic PR move for Wall Street. This is a fake scenario in which the true liability is being masked by a friendly deal. They are taking hundreds of billions and probably trillions in liability and attempting to distill it down to what appears to be a large a number but in reality is less than 1% of the total liability. This isn’t the end of it even if they want it to be.

But in the meanwhile, brokers and investors will be hearing what they want to hear and BOA stock will inch up a bit.

The reality is that these bonds are worthless  and always were worthless. Any balance sheet item anywhere is a fake if it is based upon mortgages or mortgage bonds whose value is derived from mortgage loans.

The loans were not originated in a standard contractual manner — the borrower and the lender were shown, and each agreed, to two different sets of documents. They treated the loans as if they were transferred but never actually transferred them. So the mortgage was invalid at inception and even if it wasn’t, is not perfected as a lien. The amount due is clearly effected by these settlements, but more than that, we can see that the investors as creditors have clearly abandoned their claims against the so-called borrowers

Investors, creditors stand to benefit from BofA settlement (Housing Wire)

Posted By CHRISTINE RICCIARDI On June 29, 2011 @ 12:33 pm | No Comments

The $8.5 billion Bank of America (BAC^[1]: 11.14 0.00%) settlement with investors of residential mortgage-backed securities issued by Countrywide Financial Corp., which the banking giant acquired in 2008, will have positive ramifications for both creditors and investors, according to analysts throughout the industry.

Bank of America reached an agreement^[2] with Bank of New York Mellon (BK^[3]: 25.44 0.00%), which served as trustee for 530 RMBS trust with a total balance of $424 billion, to reimburse investors who lost money on failed securities.

Barclays Capital analysts said Countrywide deals and other nonagency RMBS will now be more attractive to investors because of the potential return. For the most part, Barclays said, nonagency investors only assume small benefits from rep-and-warranty-related repurchases.

“A less negative (or positive) development on any of the (housing) issues could help alleviate price pressures,” Barclays said. “We believe the headline housing data will improve in the coming months, roll rates will continue to improve and this news should help nonagency prices.”

Barclays analysts expect cash flow from the settlement will most likely filter into the trusts that represent 226 deals involved in the complaint, thereby benefiting Countrywide cash flows, “as these effectively come in as faster prepays and reduce total losses.” Cash flows on Alt-A securities might hit senior mezzanine and even junior mezzanine loans, Barclays said. Subprime bonds should also benefit.

“Deals as part of the settlement could see a direct benefit of 8 to 10 points of additional cash flow,” analysts said. “Even if we assume that the settlement covers all of Countrywide outstanding ($285 billion), the benefit would be at least three to five points of additional cash flow.”

The $8.5 billion settlement represents about 10.8% of the $79 billion outstanding on the list of Countrywide deals repurchased by BofA. The original balance of all these securities was $179 billion. BofA is paying about 4.8% of that original balance, Barclays said.

Moody’s Investors Service said the settlement, alongside its $5.5 billion reps and warranties payout, reduces BofA’s potential exposure to higher losses under a stress scenario. And while BofA’s earnings will undoubtedly suffer in the second quarter, Moody’s expects the bank’s capital ratios to remain above the same period of 2010.

“The costs incurred are at the high end of the range that Moody’s had previously estimated Bank of America might be required to pay to resolve these matters,” said David Fanger, Moody’s senior vice president. “However, following today’s settlement and the announced addition to reserves, Moody’s believes that (BofA’s) remaining representation and warranty exposures are no longer a negative credit concern.”

On June 2, Moody’s placed the banking giant on review for possible downgrade^[4], saying analysts will evaluate the bank’s standalone financial strength to see if credit-risk improvements were made over the past few years. Moody’s expects the settlement will have positive credit implications.

BofA’s overall liability for Countrywide assets could reach $24 billion, according to Barclays based on the percentage of deals in the settlement. However, other securities could be concentrated in cleaner vintages, Barclays said.

Bank of America’s stock closed at $10.82 Tuesday after word of the settlement leaked. Shares of the component of the Dow Jones Industrial Average opened at $11.15 Wednesday, and activity in BofA is helping push the DJIA toward three days of gains^[5].

Breaking News: BofA Close to Reaching $8.5 bn Settlement with
BlackRock, PIMCO (100th Post)
Posted By igradman On June 29, 2011 (12:10 am)

As part of the Subprime Shakeout’s 100th Post (woo-hoo!), I bring you an analysis of some big, breaking news: today, the Wall Street Journal reported that Bank of America was closing in on an agreement with the
investor group led by Kathy Patrick to pay $8.5 billion to settle claims over mortgage backed securities.  If true, this would be the largest MBS settlement to date arising out of the mortgage crisis.

I first reported on this investor effort back in October 2010.  You can find my initial take here, a link to the demand letter sent by Patrick here, and a link to the response fired off by BofA here.
While we heard early in 2011 that the parties would extend all deadlines while they negotiated, we had heard very little about the progress of these efforts until today.

While the details of the purported settlement are sketchy, the WSJ report states that the current investor group includes 22 institutions, including BlackRock, PIMCO, the New York Fed, MetLife
and Freddie Mac, which collectively hold $56 billion worth of mid-2000s vintage MBS.  Though it did not report on any impending settlement, Bloomberg also published an article today on these
negotiations, and stated that the value of the securities at issue was $84 billion, while the original principal value of the securities was $182 billion.  While it is not entirely clear how these numbers line
up, my best guess is that the investor group holds approximately $56 billion of the $84 billion outstanding.

What’s also unclear is how much of the reduction in the value of the bonds at issue is as a result of pay-downs and prepayments, and how much is as a result of the trusts taking losses on foreclosed properties.  Thus, it is difficult to assess what percentage of potential damages from investor claims is being born by BofA under the settlement.  My initial reaction is that, while the absolute dollar amount sounds large, this settlement is ultimately fairly small compared to the potential damages.

This result would be consistent with the consensus among commentators regarding this investor group, including some of the comments contained in today’s Bloomberg article and my initial take on this effort: namely, the investors involved have significant other business dealings with BofA (a.k.a. conflicts), and thus would not seek an aggressive settlement.  At the same time, BofA has exhibited a growing interest in resolving its legacy RMBS liability, and thus would be interested in entering into a sweetheart settlement with a prominent group of investors that would set a precedential ceiling on future recoveries and discourage other investors from coming forward.

Without seeing the terms of the settlement and the details of the group’s holdings, it’s impossible to know what claims are being released in this settlement and how the proceeds are to be shared. For example, if the group is being paid outside of the trust waterfalls, and thus receiving the entire $8.5 billion, then the investors would actually be recovering much larger proportion of their potential damages (while potentially throwing the other investors who did not participate in the settlement under the bus, either by purporting to release their claims, or by making it impossible for those other investors to gain standing to sue).

However, sources have indicated that the settlement funds will actually be paid into the trust waterfalls.  This would be ostensibly more equitable, in that all bondholders would be entitled to receive a share of the settlement proceeds, depending on their seniority. However, query how equitable it really is for a portion of the bondholders (and most likely the senior portion, since these are primarily institutional investors) to set the settlement amount for the rest of the non-participating bondholders, and to receive the lion’s share of the benefits based on their more senior bond position. Whether the investor group could or would engineer such a settlement remains to be seen.

Regardless, the fact that these investors got any money at all out of the nation’s largest bank, let alone a material dollar amount, might actually encourage other investors to come forward.  A settlement of this size would reveal that BofA’s initial rhetoric, that it would fight these claims tooth and nail until they were forced to pay, was just that–empty rhetoric.  For example, BofA CEO Brian Moynihan stated
during the company’s third quarter 2010 earnings call that, “we will go in and fight this.  It’s worked to our benefit to—we have thousands of people willing to stand and look at every one of these loans.”  Further, this settlement undermines BofA’s recent estimate that the cost of its legacy RMBS putback issues would not exceed $10 billion.  BofA cannot seriously assume that this is the only large investor group with which it will have to tangle over defective Countrywide loans.

The simple truth is that investors have significant amounts of viable repurchase and Securities Act claims stemming from their purchase of Countrywide-issued or originated MBS, and BofA will be forced to confront many additional claims by investors in the coming years.  These additional investors might not have the same level of business dealings with BofA and thus might be willing to take more aggressive steps in pursuing reimbursement for its losses.  In that case, BofA’s strategy of creating a lowball settlement to discourage investors from coming forward might end up backfiring and further eroding the already strained capital on BofA’s balance sheet.

Article taken from The Subprime Shakeout – http://www.subprimeshakeout.com
URL to article:  breaking-news-bofa-close-to-reaching-8-5-bn-settlement-with-blackrock-pimco-100th-post.html

NAR is touting a new bill the “Prompt Decision for Qualification for Short Sale Act of 2011” which has been introduced in the U.S. House of Representative and will mandate that mortgage servicers respond to short sale requests within 45 days!

Sounds good but guess what? They already tried this once.  It was called Prompt Decision for Qualification for Short Sale Act of 201o. It never made it out of committee.

You think to yourself, “But hey, at least they are trying again.”   (You can track the progress of the 2011 attempt here:  http://www.govtrack.us/congress/bill.xpd?bill=h112-1498 )

But the real problem is that the bill is virtually worthless.  Why?

First, it provides exceptions – meaning it doesn’t apply – for most mortgages.

Example #1 – It doesn’t apply to any loan that has been securitized. – READ: Fannie or Freddie Loans. This covers over 50% of all mortgages in the U.S.

…except as provided in subsection (b) and notwithstanding any other provision of law or of any contract, including a contract between a servicer of a residential mortgage loan and a securitization vehicle or other investment vehicle…

Example #2 – It doesn’t apply to any loan where the short sale process or review of that process (such as HAFA, HUD’s ATP, etc.) is already in the works.  Furthermore, the bank can claim that the “procedure” for handling a loan in default is already spelled out in a written agreement such as the deed of trust (which governs foreclosures as well).

…shall not apply with respect to any residential mortgage with respect to which the mortgagor and the mortgagee or servicer have entered into a written agreement before the date of the enactment of the Prompt Decision for Qualification of Short Sale Act of 2011.

Second, the time limit of 45 days does little to help Texas homeowners.  Why? Because it won’t stop a foreclosure which takes only 21 days.

…may not be construed to preempt, annul, or otherwise affect any other provision of law or of any contract or program that provides a shorter period than is provided under subsection (a)…

Third, there are no real teeth or penalties if the mortgage servicer doesn’t abide by the 45 day period.

…any creditor who fails to comply with any requirement imposed under this part…any actual damage sustained by such person as a result of the failure OR not less than $400 or greater than $4,000.

Bottom line is this:

• It is unlikely this bill will ever make it out of committee and into law.
• It doesn’t apply to most mortgages.
• There are few if any remedies available to the homeowner.
• Unless you have MASSIVE equity in your home you are not going to be able to prove actual damages that are in excess of what is owed on the mortgage AND even if the homeowner is awarded the maximum damage of $4,000 it will likely be used to offset missed mortgages payments, taxes, insurance, and whatever else the bank tacks on.

Oh and by the way…the response within the 45 days could still very well be NO.

We still maintain that in most cases, direct and aggressive litigation against the bank is the best way to secure: short sale approval, maximum commission for the REALTOR, and debt forgiveness for the homeowner.

Use a local real estate lawyer in your area not just to threaten, but SUE THE BANK.

- The Bank Slayer

MERS is the bane of homeowners who simply want to know who really owns their loan and who might really have their Promissory Note.

The article below from the The New York Times highlights the flaws and misconduct that is going on behind the scenes and helps explain (in part) why you can’t easily determine who owns your mortgage.

For example,

MERS’ board gave its senior vice president, William Hultman, the rather extraordinary power to deputize an unlimited number of “vice presidents” and “assistant secretaries” drawn from the ranks of the mortgage industry.

The “nomination” process was near instantaneous. A bank entered a name into MERS’s Web site, and, in a blink, MERS produced a “certifying resolution,” signed by Mr. Hultman. The corporate seal was available to those deputies for $25.

Can you the homeowner log onto MERS and see who they claim owns your loan.  Sure –>  Go HERE.

The reality turns out to be a lot messier. Federal bankruptcy courts and state courts have found that MERS and its member banks often confused and misrepresented who owned mortgage notes. In thousands of cases, they apparently lost or mistakenly destroyed loan documents.

Destroyed?  Huh?

…not even the mortgage giant Fannie Mae, an investor in MERS, depends on it these days.

“We would never rely on it to find ownership,” says Janis Smith, a Fannie Mae spokeswoman, noting it has its own records.

If you want to negotiate from a position of strength you will need to file suit against your lender and force them to come forward with proper authority.  Don’t let them hide behind MERS and its smoke screen.

Click here to see & hear from one of the attorneys we recommend from The Gore Law Firm as he speaks about MERS during a live interview on CBS Radio.

MERS discussion with Randall Macchi from The Gore Law Firm

- The Bank Slayer

MERS? It May Have Swallowed Your Loan

By MICHAEL POWELL and GRETCHEN MORGENSON at The New York Times

Although Fannie Mae, Freddie Mac and several other large lenders are claiming a Holiday Gift with their self imposed foreclosure freeze sadly it won’t help Texans one single bit!

This “gift” is nothing more than a shameless attempt at improving their poor public image.

Why won’t it help Texans?

Because although they will suspend foreclosures for the holiday season, roughly from Dec. 20 to Jan. 3, the next foreclosure sale date is January 4!!!!!!

While most folks know the name of the Servicer of their mortgage it now identifies the INVESTOR of the loan as well.

It’s easy to look up your loan and see if Freddie, Fannie or some other “investor” claims ownership of your loan.

There are several ways to look up your loan.

First and best way to look up your loan is to use the MIN # (MERS Identification Number)

1. First look at your mortgage documents.  Look for the Deed of Trust (Not the Warranty Deed) or go online and look yours up in the property records.

2. Locate the MIN number in the top right hand corner of the document.

3. Go to https://www.mers-servicerid.org/sis/

4. Search by MIN, or if you do not have your MIN number, Go for the 2nd way to search –> Search by Property Address/Borrower Details (not as accurate)

5.  It should list your servicer and your investor.

But what if it doesn’t find your loan?

Then either you have no MIN and you are not in the MERS system or you entered it incorrectly.

If you are not in the MERS system you can still check the Fannie Mae & Freddie Mac websites to see if they claim to own your loan.

- The Bank Slayer

No wonder Freddie Mac and Fannie Mae need billions each month just to stay afloat.  They need to manage/sell over 240,000 homes!  Yep, almost a quarter of a MILLION homes have been foreclosed since 2008.

To get an idea of the volume of homes they need to sell let’s do a quick comparison to the Greater Houston Area.   The Houston Association of Realtors Multiple Listing Service (MLS) system will likely show around 50,000 home sales for the ENTIRE year.   That includes new home sales as well as resales!

Too bad the billions we are pumping into these zombies is our tax dollars.

Since “we” own Freddie & Fannie can I get the employee discount on a new home?

– The Bank Slayer

Thanks to Personal Finance Bulletin for the below info:

Taxpayers fund mortgage lenders Fannie Mae and Freddie Mac.  Last year at this time the two lenders possessed around 120,000 homes mortgaged through various lending banks.  These banks sold the mortgages to Fannie Mae and Freddie Mac who in turn bundled them as securities and sold them to investors. These federal lenders guarantee the payment of the mortgages they sell.  When the homeowners stop making monthly payments, Freddie and Fannie are on the hook for the remainder of the unpaid mortgage.

The 120,000 homes grew to 240,000 in default by September 30, 2010.  The value in these homes are now at $24 billion.  1 in 4 mortgaged homes are now in the hands of Freddie and Fannie based on a RealtyTrac report.   1 in 2  mortgages in the US are owned or guaranteed by one of the two federal lenders.

Fannie Mae and Freddie Mac are backed by The U.S. Treasury through the purchase of shares of preferred stock.  To date $148 billion has been invested in them.  As a dividend the Treasury has received  $17 billion in  two years.   When liquidity becomes a problem they return to the Treasury for more money.  Fannie Mae and Freddie Mac have both requested more funding  from the Treasury during October. It is projected that eventually the foreclosure total could rise from 142 billion to $259 billion by December 2013, according to the Federal Housing Finance Agency.

The Show Me the Note strategy is a solid one if done properly but you can’t simply deny you owe a debt and get a free house.   You signed a promissory note to someone.  The question is to whom is the money actually owed and what is currently owed against it.  Why?

Quite simply many of the investment banks bought credit default swap and insurance to cover them if the loan (or the pool of loans) goes into default.  Yes, this means that AIG (or the U.S. Treasury with our tax dollars) might have chipped in to pay-off some of the “bad debt”.

That means that your loan balance might be lower than you know.

We have Freddie Mac ON RECORD admitting that they made payments to the investors on behalf of the homeowner. Yes, this means your tax dollars are being used to pay down mortgages.

So back to the main questions.

1. To whom is the debt owed?
2. How much is owed?

Thanks to Housing Doom for this quick tip-off on the article below.

- The Bank Slayer

The fourth time might be the charm for Andrew Bailey, who has been fighting BONY Melon over their right to foreclose:

Judge Curley, the head bankruptcy judge in Arizona just ruled minutes ago that the Bank of New York-Melon must produce the custodial records in their vault in a case against an Arizona homeowner, thereby producing the note and all other docs.

This is a transformational decision.

As Market Ticker explains:

This decision changes literally everything - at least for Arizona.  If it spreads, and it probably will, it will change everything period.

If BONY doesn’t have the documentation in their custody, with proper endorsements, then there’s gonna be trouble.  You can bet the banks will try to bury notice of this way off the front page, but they’re not going to get away with it.

The key issue here has always been whether the people buying these securities were really buying what they thought they were – and maybe whether they were buying anything at all.

Right now in the New York area it is estimated that judges are dismissing 20%-50% of foreclosure cases due to sloppy paperwork. So far though, no one has walked away with a free house:

The foreclosure dismissals in this area of New York have not delivered free homes for borrowers. With so much at stake, lenders in this part of New York are aggressively appealing foreclosure dismissals, which is likely to keep the legal system bogged down, foreclosed homes off the market, and homeowners … in legal limbo for years.

Homeowners might not be walking off with free houses, but many are staying in homes payment-free while the appeals go on.  Considering how long it is liable to take to straighten this mess out, that free ride could go on for quite awhile.

If you want to see the fourth appeal made by Bailey, you can see it here.

J.P. Morgan Chase, who only weeks ago was busted AGAIN for fraudulent and fabricated documents halts foreclosures just like GMAC (Ally).

Fitch Ratings, which is a credit-rating firm has said that “defects”, i.e. fraud, have been found in foreclosure documents at Chase and that these type of “defects” are industry-wide.  DUH??

It has been widely circulated that Beth Ann Cottrell in her deposition admitted to orchestrating the signing of over 18,000 documents without reviewing them.

The sad but funny part is that J.P. Morgan spokesman Tom Kelly said that he “does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action.”  REALLY?  Like what, put up a bond to cover the homeowner when Fannie Mae, Freddie Mac or the Treasury department comes looking for the house that Chase stole.   There have been multiple cases of more than one “owner” of the debt looking to collect.

Want an example…I’m looking at a foreclosure notice in my office for one of our clients that “claims” that Bank of America, through BAC Home Loans Servicing, L.P., owns the mortgage debt and has the right to foreclosure, in other words has the Note and the Deed of Trust for this borrower.

Hi, I'm Bank of America. I own you!

Problem is that they DON’T.  Want proof, look here.

Hi, I'm Freddie Mac and I own you

Hi, I'm Freddie Mac and I own you 2

Freddie Mac bought the debt and most likely sold it into the securities market.  But at a minimum BofA doesn’t have it.

This kind of junk is wide-spread and the norm for most of these mortgage servicers.

If you or someone you know is facing a foreclosure or trying to get a short sale pushed through then get an attorney who specializes in SUING banks not just some yahoo with a J.D. that claims he knows how to do loan mods or short sales and/or deed-in-lieu’s.

These deals can be won with litigation.  Proof is in the pudding (or in this case in the courts.)

Below is the article from today in the Washington Post.

- The Bank Slayer

J.P. Morgan will halt foreclosures

By Ariana Eunjung Cha
Washington Post Staff Writer
Thursday, September 30, 2010; A1

J.P. Morgan Chase, one of the nation’s leading banks, announced Wednesday that it will freeze foreclosures in about half the country because of flawed paperwork, a move that Wall Street analysts said will pressure the rest of the industry to follow suit.

The bank’s decision will affect 56,000 borrowers in 23 states where allegations of forged documents and signatures and other similar problems are being used to try to overturn court-ordered evictions. Yet the impact may be much broader, given J.P. Morgan’s stature in the industry. If other banks adopt the same approach, the foreclosure process in many parts of the country will grind to a halt.

Officials at Fitch Ratings, a credit-rating firm that measures the health of companies, said the “defects” found in foreclosure documents at J.P. Morgan are industry-wide. Underscoring that concern, Fitch said it is considering whether to lower the grades it gives to the mortgage servicing divisions of the nation’s largest lenders.

“Over the next few weeks, we expect to see more and more companies come out with similar announcements,” said Diane Pendley, a managing director at Fitch.

The paperwork problems at J.P. Morgan mirror those uncovered last week at another large mortgage lender, Ally Financial. But J.P. Morgan’s decision is expected to have a much greater effect on the industry because it is held in high regard by its peers. By contrast, Ally, formerly known as GMAC, is still under the cloud of a $17 billion federal bailout package that it has been unable to pay back.

Both firms are investigating whether foreclosure files were improperly assembled, and whether their employees failed to review the documents even as they signed off on them. A growing number of homeowners – even those who missed their mortgage payments – are now scrambling to challenge the proceedings, weighing down an already overburdened court system.

J.P. Morgan had declined to address the matter until Wednesday. But in a sworn deposition, one of the bank’s employees, Beth Ann Cottrell, admitted that she and her team signed off on about 18,000 foreclosures a month without checking whether they were justified.

J.P. Morgan spokesman Tom Kelly said Wednesday that the firm “does not expect to find any factual problems or that customers have been harmed, but if we do find any cases we will take appropriate action.”

In addition to the measures that private lenders have taken, four states – California, Colorado, Connecticut and Illinois – have called for a moratorium on all foreclosures initiated by Ally, while attorneys general in seven other states have opened civil or criminal investigations related to flawed foreclosures.

Even as the extent of the problems has become more apparent, the Treasury Department has declined to answer specific questions about the matter since it surfaced last week.

On Wednesday, Treasury spokesman Mark Paustenbach said that officials have been in touch with Ally and that they expect it to take “prompt action to correct any errors.” He added that the agency is “monitoring their progress.”

Treasury officials raised the issue personally with Ally chief executive Michael Carpenter during a recent meeting, according to an administration official.

Yet the agency’s response has frustrated some consumer advocates. A few lawmakers have also called for investigations of whether homeowners are being improperly removed from their homes.

Sen. Al Franken (D-Minn.) said Wednesday that the Treasury Department and relevant federal agencies should begin their own inquiry.

“With millions of families losing their homes, it’s inexcusable for companies like Ally to be this patently negligent,” he said. “I want the federal government to hold Ally accountable and ensure that homeowners who wrongly received foreclosure get the compensation they deserve.”

Ira Rheingold, director of the National Association of Consumer Advocates, criticized the Treasury Department, saying it has not been forthcoming about what actions it is taking to the remedy the situation.

The agency has been “protecting servicers and investors and doing what is minimally possible to help homeowners,” he said.

Other consumer advocates say administration officials face a no-win situation. If they determine there is no reason to take action, they may be criticized for not helping homeowners. But taking extreme measures such as calling for a national moratorium on foreclosures could hurt the economy and damage the housing market.

Mark Zandi, chief economist for Moodys.com, said that, in the worst-case scenario, the document-processing problems could lengthen the foreclosure process from three years to as long as a decade, especially if homeowners use the flawed paperwork to appeal their evictions.

The long holdup could have “macroeconomic consequences” as a destabilizing force on housing prices. Banks could become more unwilling to extend credit to households or to small-business owners who use homes as collateral. And investors who had been keeping home prices propped up by buying foreclosures may stop and never come back.

He added, however, that it is still an open question how the courts will handle the paperwork problems.

Ally officials on Wednesday declined to comment on any ongoing or potential investigations, but they have said that they are confident that “the processing errors did not result in any inappropriate foreclosures.”

Company officials have declined to disclose how many loans may be affected and how much remedying the issue might cost, but spokeswoman Gina Proia said the firm “does not anticipate significant adverse effect on Ally related to this matter.”