To put this in context, we are tracking the following foreclosure and mortgage-related cases: (1) borrower class actions – 67 pending class-action suits in 23 states challenging foreclosures based upon robo-signing, defective assignments, reliance upon the Mortgage Electronic Registration Systems (MERS), or the misapplication of payments; (2) class action cases related to the Home Affordable Modification Program (HAMP) – 57 class actions in 25 states alleging impropriety in processing loan modifications regarding HAMP, as well as another 24 class actions in 18 states alleging misconduct under non-HAMP modification programs; (3) investor actions – 21 investor suits in 12 states alleging foreclosure and securitization misconduct that seek to “put back” defaulted loans to the loan originator and damages based upon failure to properly form the securitization trusts, misrepresentation regarding underwriting and other misrepresentations, robo-signing, or the use of MERS; and (4) Attorney General initiated suits – three suits brought by the Attorney General of Ohio against GMAC, and the Attorneys General of Nevada and Arizona against Countrywide and Bank of America. Additional investigations have just recently been undertaken. Absent a settlement with the state Attorneys General, more suits by state Attorneys General are likely to be filed.

Although no major judgments have been rendered to date, most of these cases are in the initial phase of litigation. If judgments are rendered for plaintiffs in these cases they could materially forestall the foreclosure process and create considerable uncertainty. Absent resolution to the mortgage servicing practices, claims and investigations regarding past practices will continue to proliferate, likely deferring the recovery of housing and mortgage markets.

It is no wonder the market is sluggish. This is taken from recent testimony by FDICs Mark Pearce. If lenders are dealing with these issues, they are going to be reluctant to approve new loans.

Issues regarding the process of handling mortgage foreclosures have cap-tured widespread attention during the last several weeks. While this is largely a documentation issue that is likely to be rectified relatively promptly by most lenders and servicers, allegations that large numbers of foreclosures have been processed without an adequate review of the relevant facts and that documents used in the foreclosure process did not meet legal require-ments have raised broad concerns among the government and industry, in-vestor and consumer groups about the mortgage finance business. Thus, the continuing task is the reconstruction of the credibility of mortgage finance systems.    

On the ground, there are significant aftershocks from the documentation disclosures, in the form of market and regulatory reaction:

• Borrowers’ lawyers have brought a range of challenges in an effort to protect them from foreclosure, including allegations regarding allegedly improper foreclosure practices, claims relating to the use of the Mortgage Electronic Recording System (MERS) and challenges to the operation of the Home Af-fordable Modification Program (HAMP) in regard to loan modifications.  
• The Attorneys General of all 50 states have announced a coordinated investigation of the mortgage servicing industry.  
• The Office of the Comptroller of the Currency has reportedly initiated examinations of the foreclosure and loss-mitigation procedures at large national banks.  
• The Federal Housing Finance Agency has in-structed Fannie Mae and Freddie Mac to re-quire their servicers to review foreclosure-related actions to ensure that any affidavits that have been filed were correct and com-plied with applicable law.  
• Institutional investors, as well as the Federal Reserve Bank of New York, are seeking with increasing insistence to have the mortgage-backed securities they hold repurchased, based on questions regarding the servicing or credit quality of the underlying mortgage loans.  
• To the extent that issues related to foreclo-sure processing may impact the stock price or financial performance of bank holding companies, shareholders may explore the possibility of alleging securities violations or mounting derivative actions against direc-tors or officers.  

Firms that participate in all phases of the home mortgage process from origination to securitiza-tion, servicing and foreclosure are likely to be drawn into some aspect of the current controversy and investigations. Our experience suggests that, to prepare for such potential challenges to past and current business practices and to reestablish credibility in the marketplace and with regulators, these parties should consider the following:  

• An independent review of potential trouble areas to provide objective support for the essential integrity of the processes used in the past or to guide future efforts to identify potential remedial steps for operational and legal processes;
• Participation by the audit committee or a special committee of the board of directors in order to provide appropriate board oversight and reassur-ance;  
• Developing a strategy to address the concerns of regulators, particularly where companies may be subject to the jurisdiction of more than one state or federal financial regulatory agency, including how to deal with potential concurrent civil and criminal investigations, cease and desist orders, civil money penalties and various forms of restitu-tion;  
• The dynamics of responding to multiple Attorneys General investigations and multi-faceted litigation and settlement processes, including shareholder and derivative suits;  
• The impact on and potential liability of or to busi-ness partners, service providers, counterparties, investors and others in the mortgage finance chain.  

While the documentation deficiencies that have been alleged appear to be fixable, the aftermath of address-ing regulatory, investor and consumer concerns in order that the country can once again enjoy an efficient, effec-tive and reliable mortgage finance system will require more attention and thought. Success in that regard is likely to be the product of significant remedial and pro-active actions that rebuild confidence in institutions and processes.

The stop foreclosure message seems to have taken hold in light of the recent hoopla surrounding the “robo signing” mess created by mortgage lenders who have been caught red handed filing bogus and fraudulent affidavits in order to steamroll over distressed homeowners and take their homes through foreclosures that are in many cases illegal.

Major mortgage holders who have been very active in their bank foreclosure departments have now brought home foreclosures to a halt. J.P. Morgan Chase, GMAC and Bank of America, among others are leading the way in a massive foreclosure stoppage across America. Chase and GMAC have stopped foreclosures in 23 states. Bank of America in response to increasing pressure from congressional inquiry and court cases has now announced it is stopping home foreclosures in all 50 states.  It is only a matter of time that other lenders will follow suit.

By Annie Lowrey 10/12/10 4:32 PM

Earlier today, the White House reiterated that it opposes a blanket moratorium on foreclosures, preferring to work with servicers and lenders to sort out the mortgage paperwork fiasco while letting the 50 state attorneys general file charges, if they see fit. (There is no federal regulator of mortgage servicers; each state has its own.)

This afternoon, Florida Attorney General Bill McCollum — who is considering charges on behalf of Floridians, residents of the state most impacted by the foreclosure crisis — agreed that a full freeze might not help. He wrote and released letters to major servicers, expressing concern over the widespread fraud. Here is one letter, to the head of Litton Loan Servicing:

As Attorney General of the State of Florida, I am writing you to express my concern for Florida’s economic future and the credibility of Florida’s judicial foreclosure system as a result of the actions of your company — actions that have affected the integrity of title to real property for Florida’s homeowners as well as the foreclosure process in Florida.

I was distressed to learn from media reports that your company may have engaged in filing faulty affidavits in foreclosure cases in Florida courts with regard to ownership of promissory notes and affidavits that attested to personal knowledge of facts when, in fact, the affiant had no such personal knowledge. The net effect of these actions, among other things, has been to cast a shadow on the title to these properties which is of such proportions that at least one major title company is now refusing to write title insurance on foreclosed properties. Even more disturbing in that some of these foreclosed properties have already been sold and resold, and now their titles are in question, which may substantially slow the economic recovery for the citizens of Florida.

All of this has been compounded by the impact of the recently announced moratoria on foreclosures by several mortgage servicers and the plethora of private litigation that has privately commenced. In my view, the moratoria and the private litigation are counterproductive to obtaining the swift solution necessary to address this serious problem facing Florida’s already fragile economy.

As many as 9 million U.S. mortgages in the foreclosure pipeline or already through the process may face legal challenges because of questions about the validity of documents, according to Morgan Stanley.

About 2.5 million homes have been repossessed since 2005 and another 6.5 million mortgages are in foreclosure or may be soon, Morgan Stanley’s Oliver Chang, Vishwanath Tirupattur and James Egan wrote in a note today. The validity of documents used to verify ownership and payment obligations may be in question for each of those loans, Chang said.

“We are talking about some pretty big numbers,” Chang, a San Francisco-based housing strategist, said in a telephone interview today. “There’s a lot of developing aspects” to determine the actual impact, he said.

Lawmakers, state attorneys general and consumer groups have pressed mortgage firms to follow Bank of America Corp., which last week suspended all foreclosures to check whether faulty documents were used to confiscate homes. A worst-case scenario, in which questions of legitimacy arise beyond procedural issues and a freeze extends to all states and servicers, would lead to “a torrent” of eventual foreclosures, retroactive litigation on home seizures and a delay in the housing recovery, Morgan Stanley said.

In addition to Bank of America’s halt, JPMorgan Chase & Co. and Ally Financial Inc.’s GMAC Mortgage unit froze seizures or evictions in 23 states. There are about 3.3 million mortgages in foreclosure or more than 60 days past due in those states, according to New York-based Morgan Stanley.

(NATIONAL) -- The scope of what is being called in some circles “Foreclosuregate” keeps expanding and lenders and loan servicers including JPMorgan Chase and Ally Financial are facing an explosion in homeowner lawsuits and state attorney general investigations over claims of falsified mortgage documents, according to a report by Bloomberg Buisnessweek.

In addition lawmakers in both houses of Congress have called for investigations

Adding to the mess is that “procedural mistakes” in the handling of mortgage documents have clouded titles establishing ownership of the homes, a problem that could plague both buyers and sellers of those homes for years.

In December 2009, a GMAC employee said in a deposition that a team of 13 people signed about 10,000 documents a month without verifying their accuracy.

In lawsuits across the country, homeowners claim lenders and servicers have used falsified documents to foreclose on homes, sometimes when the banks didn't even hold titles to the properties.

THE MERS PROBLEM

The Mortgage Electronic Registration Systems (MERS) based in Reston, Virginia faces its own mounting legal challenges.

MERS was created by the mortgage banking industry to handle “mortgage transfers” between member banks but a lawsuit filed on Sept. 28 in federal court in Louisville on behalf of all Kentucky homeowners claims that MERS was much more than “transfer” house. It claims MERS was part of a conspiracy to create false promissory notes, affidavits, and mortgage assignments to be used in illegal mortgage foreclosures.

Similar class actions have been filed on behalf of homeowners in Florida and New York.

Adding to the confusion and complexity of the case is that title insurers may also end up in court bringing and defending lawsuits because they could be held responsible if foreclosures are reopened.

In that case, title insurers might be going after the banks or whoever assured them there was a clear title.

And individuals who purchased homes in foreclosure sales face their own worries, as paperwork errors raise questions about the validity of the titles needed to prove ownership.

The problem? Defective documentation has created millions of “blighted titles” that may plague the nation for the next decade, according to one attorney, Richard Kessler of Sarasota, Fla., who conducted a study that he says found errors in about three-fourths of court filings related to home repossessions.

WHO REALLY DOES OWN THAT HOUSE?

Tyler Durden
Zero Hedge
Oct 5, 2010

The Massive Mortgage Mess as we affectionately call it seems to be getting new names with each passing day – the latest one is, quite appropriately, RoboSigning Scandal (funny how after the stock market, “robotic” technology will soon becoming equated with the biggest mortgage scam in history). During today’s Kudlow segment, CNBC’s Diana Ollick who is by and far the company’s best (and only) investigative reporter, confirms various so far unfounded rumors, that the government is planning to institute a 90 day foreclosure moratorium as it deals with the realization of just how big and pervasive the mortgage problem is, and even worse, will soon be. It is so bad that even a typically ebullient Larry Kudlow is forced to note that this is the “housing equivalent of the credit financial meltdown” and that “this is going to go on for ever.” The biggest issue that is now developing, as we noted last week, is the fact that title insurers (firms such as Fidelity National, First American, Stewart Info and Old Republic) are refusing to insure mortgages in foreclosure or otherwise, uncertain as to who actually owns the title. And for all those who believe this will merely keep prices artificially high, we have very bad news – the problem with the title insurers walking away on fears of lawsuits is that no lender will be willing to write a mortgage without title insurance, meaning that suddenly the up-front component of home purchases will either necessarily have to surge, or home prices will have to plunge by a like amount, as there is simply not enough equity (read money) to cover the resulting debt deficiency. Alas, this mess is just starting, and as people realize how bad it is, it very well may lead to a total collapse in the housing market.

Their home was sold by mistake

Advertisement | ad info

By MARILYN KALFUS THE ORANGE COUNTY REGISTER

The Orange County Register The Orange County Register

updated 9/27/2010 2:15:42 PM ET

Douglas Garhartt and Brandon Lively were just settling in to the ocean-view San Clemente townhome they bought in March when suddenly they were faced with the threat of eviction.

Less than a week after they closed sale on the condo, it turned out, a small group of investors had purchased the same property -- at a foreclosure auction.

How could that have happened? How could one home have been sold to completely different buyers?

Both sides say they did everything right. Both sides have deeds. And both sides are in court right now, trying to sort out the mess.

'Why are you getting evicted?'

Garhartt said he and Lively were thrilled when they bought their 3-bedroom condo on March 11. The seller had been in default on his mortgage and Garhartt and Lively purchased the place as a short sale for $365,000, far less than the $712,552 the seller owed on the loan.

But on March 15, records show, the bank that was involved in the short sale sold the same property at auction for $346,896.

Jason Grodensky had bought the Fort Lauderdale home with cash last December, then says his home was sold out from under him. (Robert Duyos, Sun Sentinel / September 19, 2010)

When Jason Grodensky bought his modest Fort Lauderdale home in December, he paid cash. But seven months later, he was surprised to learn that Bank of America had foreclosed on the house, even though Grodensky did not have a mortgage.

Grodensky knew nothing about the foreclosure until July, when he learned that the title to his home had been transferred to a government-backed lender. "I feel like I'm hanging in the wind and I'm scared to death," said Grodensky. "How did some attorney put through a foreclosure illegally?"

Bank of America has acknowledged the error and will correct it at its own expense, said spokeswoman Jumana Bauwens.

Grodensky's story and other tales of foreclosure mistakes started popping up recently across South Florida. This week, GMAC Mortgage, one of the nation's largest mortgage servicers and a major mortgage lender, told real estate agents to stop evicting residents and suspend sales of properties that had been taken from homeowners in foreclosure. The company said it might have to "correct" some of its foreclosures, but was not halting those in process.