You know in the animated movie Madagascar, when Alex the lion starts to see walking steak every time he looks at his best friend Marty the zebra? Well, bill collectors are like a type of carnivore. The training and culture in a bill collection business is all about bringing in the benjamins.
Bill collectors are NOT social workers, debt counselors or consumer advocates. They are bill collectors, they will eat you. Oh, they may call themselves “mortgage servicers,” but what does that mean? It means they collect the money from the homeowners.
Yet, under both HARP and HAMP, these bill collectors are suddenly supposed to throw off everything they know, and help you pay LESS money on your mortgage. It’s like asking a lion to live on coconuts when there is yummy zebra walking around.
Which may explain why the [PDF] statistics for permanent mortgage modifications have been so dismal. Of the 3,137,548 requests for information sent to borrowers to determine eligibility for modification, only 1,032,837 have even gone into a trial period. Of the trial period mortgages, only 31,382 have been offered permanent modifications (Third quarter results for 2009). Yes, Firepups, you read that right, 1% of those who may be eligible have made it through the gauntlet and obtained a permanent modification.
There’s a handy dandy chart at Pro Publica where you can check on your own lender’s success rate. BTW, the overwhelmingly highest success rate comes from what are known as “portfolio” mortgages. A portfolio mortgage is one that is still held by the bank that originated the mortgage. These banks are more likely to outright forgive some of the principal, have a much higher rate of conversion from trial period to permanent modification, and a much lower re-default rate after conversion.
Yep, the traditional system, where a bank makes the mortgage, services the mortgage and keeps the mortgage on its own books is MUCH better adapted to meet this crisis than the fancy, fractionized, securitized mortgage with its layers and layers of both fees and conflicts of interests.
And despite the requirement that foreclosure is supposed to be stayed pending the outcome of the mortgage modification process, people are still losing their homes even though they have successfully completed their trial period. See, here.
There have been many reasons offered to explain this pathetic outcome.
– The servicers have failed to adequately train their bill collectors in the new HARP and HAMP procedures and how to apply them.
– The computer programs used by the servicers cannot accommodate a lesser payment amount and continue to generate delinquency alarms during the trial period.
– The servicers do not have enough warm bodies to handle all the new paperwork and phone calls.
– The loan modification department of the servicer does not share information with the foreclosure arm of the servicer.
– There is no agency or watchdog to ensure that servicers are doing HAMP or HARP in good faith, or even with minimal competence.
– Loan modification usually requires the servicer to take at least a small haircut, however, foreclosure results in additional fees to the servicer. Nice article here. [PDF] {
It’s that last one, all the financial incentives are stacked in favor of the servicer NOT doing the modification — or not doing it properly, that really jumps out at me. If makes all the other obstacles insurmountable.
Consequently, judges around the country—despite Congress’s failure to pass cramdown [PDF]—are starting to take consumer protection to heart. Up until the last few years, when a bank moved for foreclosure, the judges just assumed that the bank’s paperwork and legal case were in order. Consumers had to show a smoking gun to get a judge’s attention. Not anymore.
As I previously told you, a bankruptcy judge in the Southern District of New York outright cancelled a mortgage, because the bank failed to prove it owned the mortgage—its paperwork was not in order. Judge Robert Drain later pointed out, "As has become painfully obvious over the last two years, the servicers just don’t have their act together."
Other judges have stopped simply assuming that mortgage servicers and banks have their duck in a row. A State Supreme Court Justice in Brooklyn has taken to scrutinizing lender’s papers even when the, often pro se, consumer hasn’t pointed out any defects.
The judge, Arthur M. Schack, 64, fashions himself a judicial Don Quixote, tilting at the phalanxes of bankers, foreclosure facilitators and lawyers who file motions by the bale. While national debate focuses on bank bailouts and federal aid for homeowners that has been slow in coming, the hard reckonings of the foreclosure crisis are being made in courts like his, and Justice Schack’s sympathies are clear.
He has tossed out 46 of the 102 foreclosure motions that have come before him in the last two years. And his often scathing decisions, peppered with allusions to the Croesus-like wealth of bank presidents, have attracted the respectful attention of judges and lawyers from Florida to Ohio to California. At recent judicial conferences in Chicago and Arizona, several panelists praised his rulings as a possible national model.
So too, did Justice Spinner of NYS Supreme Court, Suffolk County, cancelled a mortgage because a bank lacked paperwork proving ownership. And in Kansas. And in Florida. If you know of other similar cases from your state, let me know in the comments—with a link if possible and I’ll update the post.
[Earlier posts in this series and related links at Kouril's Foreclosure Fraud Resources]



40 Comments







moan.
Isn’t it true that the banksters somehow make more money by foreclosing?
I donn’t know, but if they’re seriously trying to sell the property they foreclose on, they’ll still lose money – prices aren’t as high as the value they’re putting on stuff. Their usual practice of cosmetic work isn’t going to impress as many people, either.
(The people I know who are most likely to be foreclosed on have a house in need of, I would estimate, about 40K in work, what wtih painting and refinishing inside and out, and a new AC, probably a new furnace; the plumbing and electrical systems are close to 60 years old and probably not as solid as they should be. These people haven’t had the money to put into repairs for several years, were iffy on it fro some years before that, and things just keep getting worse for them.)
No, actually the holders fo the debt LOSE moeny in foreclosure. But you don’t get to deal with the onwers of your debt (unless you are lucky enough to have a portfolio mortgage), you deal with the servicers.
And the servicers make more fees, the more “services” they perform. So, yeah, they make much more if they foreclose on you , even if that means the entity entitled to repayment gets shafted.
All in unison pups:
“Can you say ‘conflict of interest’?”
MM: Have you asked your lender who is doing the mod the two questions?
Who is the owner of the paper and has the Insurer paid it off.
If the bank doesn’t the papers a person can file a quiet title action. In effect if the bank cannot prove they own the house then you do.
Just run a title report?
Title reports don’t show status of loans without some recording action (Notice of Default, Reconveyance, etc).
I’d be very interested in how one could trace a payoff from a CDS to a specific loan. As I understand it the CDS payment is for the bond, a bundle of loans. How can one track the loan into a bond?
Will MERS show it?
Loo Hoo, if I understand your question, the answer is no, a “quiet title action” is not the same as “running a title report.
Quiet title is an ancient common law form of action that is now statutory in most (probably all) states.
You file a lawsuit “to quiet title.” That means that essentially, the court rules (if you win) that there is no dispute that the plaintiff has title to the property, and blocks any competing future claims to that title.
It’s most often used where there have been mutliple deeds issued over the years, or owners having died intestate (without a will), or without the estate’s property being settled. There are lots of reasons one might sue to quiet title, but this is yet another instance.
Here Come the Judge…
Thank you, Cynthia
We were told that these Mortgages were the toxic assets on the banks books.
If that had been in the least true it would have been better for the Government to fix the Mortgage problem than to just give the Banks money.
They chose to give the Banks money and the Mortgage problems still exist, and foreclosiers continue, housing prices are still down, home building is down, unemployment is up, economy is down, but yet Bank profits are sky high.
Wisdom is something Washington has none of, not an ootsy, a pinch, a dibble, an incling, or even a hope.
An interesting thing that I am starting to see, are homeowners asking whether or not their mortgage was paid off by a credit default swap.
Think about it, the government gave AIG a truckload of money to pay off banks who held non performing mortgages (actually securities based on mortgages, but I’m trying to simplify here).
Well, if the mortgage holder was already paid off by the insurance, you don’t owe the mortgage holder anything do you?
You might owe the insurance company under a theory called subrogation, but the insurance company is not the entity trying to foreclose on you.
If the bank has been paid off by insurance the bank lacks standing to sue you.
So, now in addition to “show me the note!”, you have to ask “was this debt paid off by insurance?”
Great post yet again. Still a big fan of your writing.
Excellent comment at 8. That could be a post all on its’ own.
There’s an ugly as shit 8-unit condo a few blocks from me. Totally out of place in the neighborhood. The developer was in trouble before the buildings were completed and to the best of my knowledge not a single unit was ever shown to a prospective buyer. The bank foreclosed on the property a little over a year ago and it sits, unmaintained. This is Florida. In another year or two none of those units will be habitable without extensive renovation. What in the world is the bank going to do with this property? Why would they take possession of a property knowing they’re stuck with it?
Why? Because they are carnivores. They don’t understand the nutritional value of yummy tofu or the wonders of rice and beans.
The foreclosure was likely done by the servicer who has ZERO incentive to think past the moment of eviction because that is likely the final service related to this property for which they collect a fee.
They are not trying to maximize the profit to the owner of the debt (the investor) they are trying to maximize the fees they can charge on the debt
Gotcha. Thanks. That’s pretty simple.
My sister “successfully” re-did her upside-down mortgage outside of Phoenix due to hardship, though she didn’t ask my opinion until after it was done.
The house had a mortgage of ~$250k, but was only worth ~$150k.
New terms:
- 40 year mortgage on the $150k, 2% interest the first five years, increase 1%/year for the next three years until it reaches 5%, where it stays for the duration.
- The remaining $100k was not written down, but instead remains, outside of her payments, essentially a $100k, interest-free loan, due at the end of the mortgage.
At first I was upset, but in the end, given she lives in Arizona where she can essentially walk away, I think she came out ok. She basically can’t sell because she’ll stay underwater for the next umpteen years, but if she thinks of it as a below-market rental, and she can bring herself to leave if the situation is right, she’s done well.
how old is she? if she’s my age, the mortgage will outlive her.
She’s 38. She has a reasonabl
She’s 38, so she has a reasonable chance of outliving it.
She did come out OK. That mod exactly fits the HAMP guidleines. She is one of the rare cases.
Good to know, thanks.
How long had she paid on the loan? Starting all over is killer since the first 5 years are basically interest only.
CalculatedRisk had a post on some stuff .. JimtheRealtor did a vid on some of the other types of fraud:
http://www.calculatedriskblog.com/2010/03/jim-realtor-on-short-sales-rampant.html
Wednesday, March 31, 2010
Jim the Realtor on Short Sales: “Rampant Fraud and Deceit”
by CalculatedRisk on 3/31/2010 10:40:00 PM
–snip–
This is an excellent article, which I ordinarily would recommend to others; but I am a former editor and it contains several typos. On that basis I would be embarrassed to recommend it. Please consider getting a proofreader; it’s a shame when good information is compromised by shabby proofreading.
will go back and look. T/Y
Cynthia…are you LHP?
hit refresh [f5] and tell me if I got tham all.
Cynthia:
Now, type after me:
owner
owner
owner
Very good!
(I always read your posts, cuz they’re smart and informative, so, in addition to the above, Thanks, for all your work.)
No shame – in the Skinner link:
I have read of banks foreclosing on homes that didn’t have a late payment.
The Banks
Are selling packages of foreclosed homes at $0.60 on the BPO (estimated market value) and have been for the past few month.
The Banks are selling packages of NPN (Non Performing Notes) for $0.35 on the dollar.
WHY didn’t the Banks offer to homeowners these deals to KEEP then in the homes?
The poison pill that HAMP generally represents is a boon to banks that continue to require bailouts. Your outline shows parts of the problem but there are so many pieces that we all become deadened to the problem. The website loanfraudinvestigations had a post that summed up the concept to me called HAMP = Foreclosure which, along with a few other articles I’ve read, made it clear that there are two pieces to this story.
The first piece is easy, the Fed is in the business of protecting banks. Geithner in no way sees himself as a regulator. His job is to make sure that the TBTF do not, in fact, fail.
The second piece, as shown by Cynthia and the previously linked post, is that the criteria for being allowed into HAMP is that the borrower is so close to the edge of failure that the holder of the loan can make the most money by keeping the nearly insolvent borrower on the hook for as long as possible. Taking money from the government under the general pretense of working out what often cannot possibly be worked out in order to refill the banks coffers.
Carnivore is too polite a term. These businesses are parasites on the generally unprotected who imagine that the government is there to keep the playing field level and fair.
Let Me reiterate this story of what happened to My Mother.
A Broker sold Her a mortgage She didn’t need for more than fifty thou what Her payoff was. The difference disappeared.
A Bank gave that mortgage for a hundred and fity five thousand dollars to an eighty nine year old woman on a house no where near worth that much.
The Paymenats were more than He SS check so she couldn’t even pay the first payment.
A Nice Lawyer tried to fight all of this for three years, and with all the Laws against taking advantage of the elderly. He lost in the charlotte Co. Courts in Florida because some pompose Judge sided with the Bank over all president.
Well after finding out She was going to lose Her house She only lasted three months before worring Herself to death. The only good thing was it was before they actually took the house.
The FDIC took over the Bank because this wasn’t their only bad deal, but didn’t change the outcome. A Sheriffs sale was held and guess what the only bidder was that Bank, and they bought the house a Sheriffs sale in the same Court System for one hundred dollars.
They have our Courts bought just like they do our Government, and we don’t see it.
Thank you for this, Cynthia.
I’ve recently learned that the mortgage company that foreclosed on my house is being sued in a class action lawsuit.
Cynthia, can Homeowners initiate suits against their original loan sources to determine if these sources still have legal standing to foreclose?
Depends on the State.
I’ve been told a lawsuit is necessary for the discovery of information about the actual owner of the loan.
Synoia, you mean there are some states where one can’t even find out by suing?
Great, timely article, Cynthia. And, Sunlight Commenters, good work sharing what’s actually going on out there. This will help save more people and good organizations from predation. RAWK on!