Attorney General Alert: We at LoanWorkout.org “believe” that your recent unfair and deceptive predatory lending settlements can be parlayed and effectively used against the incredibly unfair and deceitfully deceptive mortgage servicing industry.
A mortgage servicer’s fiduciary duty is “only” to the investor for which they are servicing the pool of mortgages for and not the homeowner. Every loss mitigation technique they perform, such as a loan modification, repayment plan and or short sale needs to be in the “best interests” of the trust and these instructions for servicing a pool of mortgage loans are outlined in what is called a ‘Pooling and Serving Agreement’ or PSA.
A mortgage pooling and servicing agreement describes how pooled loans will be serviced and dictates how proceeds and losses will be distributed to investors.
From the American Securitization Forum (ASF):
Most subprime transactions authorize the servicer to modify loans that are either in default, or for which default is either imminent or reasonably foreseeable. Generally, permitted modifications include changing the interest rate on a prospective basis, forgiving principal,capitalizing arrearages and extending the maturity date.
The “reasonably foreseeable” default standard derives from and is permitted by the restrictions imposed by the REMIC sections of the Internal Revenue Code of 1986 (the “REMIC Code”) on modifying loans included in a securitization for which a REMIC election is made. Most market participants interpret the two standards of future default – imminent and reasonably foreseeable – to be substantially the same
California is the first state that is using the laws of the land to supersede these flawed mortgage servicing contracts with the new bill, 1137 which requires lenders to wait an additional 30 days after a homeowner misses the first payment before filing a default notice and use more “due diligence” to attempt a loan modification.
The law also states that a bank or mortgage servicer has a duty to its investors to offer loan modification terms that will yield a net present value that is greater than what would be achieved if a lender took back and sold the collateral.
Section 1(c) states:
Under specified circumstances, mortgage lenders and servicers are authorized under their pooling and servicing agreements to modify mortgage loans when the modification is in the best interest of investors. Generally, that modification may be deemed to be in the best interest of investors when the net present value of the income stream of the modified loan is greater than the amount that would be recovered through the disposition of the real property security through a foreclosure sale.
The laws took effect July 8.
Main Street American homeowners need to understand that once they sign and close on their mortgages, they turn from valued clients to their lenders or mortgage servicers to nothing more than collection accounts. Often their loans and rights have been sold and in most cases within 30 days.
Borrowers that were once valuable clients and wooed by commercials and advertisements with promises of American Dreams and untold wealth, are quickly sold once you sign on the dotted line and you are now known as “debtors” and believe me, they are here to collect only and not to truly help, contrary to popular lender lip service.
Yes Main Street and Washington, a mortgage servicers #1 obligation and duty is to people they do not know, will never see and they may never know who the “true” owners or actual decision makers are for the mortgage for which they service. Also, it appears that these investors are in some kind of black hole with a bat phone that no one seems to know who they are, what they are, their phone number and who calls the loan modification shots.
This seems to be an ongoing mystery and debate on Capitol Hill.
This past Wednesday Barney Frank and the House Financial Services Committee grilled billion dollar a year hedge fund CEO’s like John Paulson or Paulson & Company and other hedge fund executives to see why, what and who can do what in the loan modification process.
The meeting was called after hedge funds, Greenwich Financial Services and Braddock Financial, issues a press release that they would bring litigation against mortgage servicers who modify mortgages owned by the funds.
“They can’t get this worked out,” Frank said. “Who am I going to believe? You or my own eyes?”
Good question Mr. Frank. I think the facts are that you can’t believe anyone on Wall Street right now and that these testimonies and opinions from these fat cats need to be taken with a grain of salt and a bottle of snake oil. So, let me help Washington and the media understand the real loan modification facts.
The debate is whether mortgage servicers have the authority to offer loan modifications on investor owned loans that have been that have been sliced and diced on Wall Street, securitized and then sold to multiple investors such as pension funds, hedge funds and insurance companies.
In other words, these mortgages are no longer owned by the banks that service them. So, they are just really bill collectors and do not own the actual underlining mortgage debt.
So the question remains: Why is your mortgage sliced and diced and why is your mortgage servicer so uncooperative?
One of the answers is in the fine print when you sign your mortgage contract. Basically your lender has the right to sell your loan within “x” amount of days after it is closed and 99% of the time (almost like there was a mass conspiracy to get this bad mortgage off their books) that is exactly what happened.
Honestly ladies and gentleman, if these (lenders) “really” thought the mortgages they were originating over the past 5 years would be solid long term investments, then why did they all quickly package these loans in mass pools and then ship them to Wall Street to be rated by their friends, sliced and diced and then sold to the world in a tangled web of unfair and deceptive toxic investments.
Investments and mortgages that were made to fail, mortgage pools made to confuse and sold has solid triple AAA rated securities to pension and insurance funds around the world.
Mortgage pools that are so diluted by being sliced and diced and with so many different owners that it will be 100% impossible for mortgage servicers to EVER get 100% investor approval or cooperation in the loan modifications they perform. Isn’t that the whole point behind the deceptive scheme? Damn clever bankers…
As mentioned above, a mortgage servicers fiduciary duty is “only” to the investor for which they are servicing a pool of mortgages for and these instructions for servicing the pool of mortgage loans are outlined in what is called a ‘Pooling and Serving Agreement’ or PSA.
In order to know exactly what and cannot be done in the loss mitigation/loan workout process on a pool of mortgages lies in these top secret PSA’s that really aren’t that secret and many example can be found with a quick Google search.
Brad Sherman, Democratic Representative from California said, “The servicers are telling me they’re not in power at this time. You have 10 investors, and any one of them can allege from a purely negligence standpoint that the value of the portfolio has not been maximized.”
The facts are that the truth of what can and can’t be done lie in these PSA’s that govern the mortgage for which the servicer services. It is a known fact in the mortgage servicing industry that 95% of these PSA’s allow for certain “mandatory” loss mitigation procedures that “must” be done by these mortgage servicers.
I believe that the truth of the matter is that these mortgage servicers are not upholding their contractual agreements that are governed by these PSA’s and most every mortgage servicer is in breach and 100% violation of these contracts.
It amazes me that these funds are not making sure that these mortgage servicers are really talking care of their best interests and these mortgage contracts.
Do these funds know that mortgage servicers are severely understaffed and operating at 10% capacity of where they should be because of the scope of the problem?
Do investors know that mortgage servicer employees and negotiators are handling file loads (struggling borrowers/homeowners) in the 500-1000 range?
Do investors know that in order to properly manage their investments, a file load of 100 should be maximum and thousands of foreclosures are happening monthly simply because mortgage servicers are under gunned and under staffed, BIG TIME?
Do investors know that working in the mortgage servicing industry is the most underpaid , abused, stressful and overworked employee sector in our country right now and employee turnover is sky rocketing?
Do investors think that a mortgage servicer that is operating at 10% capacity and has negotiators with 500-1000 potential foreclosures on their hands are acting in the best interests of the trust?
Attention State Attorney Generals: Isn’t the whole mortgage servicing industry really built on an unfair business model that is purposely and highly deceptive?
One would think that this screwed up industry was really a worldwide ponzi scheme that started with a defective credit instrument and product (home mortgage and American real estate) and then entered a chain of unfair and “almost” undetectable transactions and purposeful deceptive paths to nowhere land?
Was it all a scheme that started by using American greed and utilizing pawns like little mortgage and real estate brokers that then handed the mortgage and real estate loot to the lender, then packaged and sold by lenders to their partners in crime on Wall Street and then sold to unknown investors around the world.
This is the one time in my life that I wish I had the tough job of upholding the law and worked for our state Attorney General Office because really, this all seems so basic and common sense to me and a recent comment by the Massachusetts courts really says it all for America and I feel this one statement can stop each and every single foreclosure in America.
Mass Courts: In roundly rejecting these contentions, the Court stated that Option One and H&R Mortgage “cannot credibly contend that they did not have fair notice that it was unfair to issue home mortgage loans in Massachusetts with reckless disregard of the risk of foreclosure.
Research Links on Loan Modifications from Moe Bedard (951) 531-0148:
American Securitization Forum (ASF):
The Case for Loan Modification With a Foreword by Sheila C. Bair, Chairman Federal Deposit Insurance Corporation – Misconception: Restructuring violates the contractual rights of investors.
OTC – Accelerating Loan Modifications, Improving Foreclosure Prevention and Enhancing Enforcement
MBA – So, what has this got to do with mortgage banking and loan modifications?
FTC – Unfair and Deceptive Practices in the Mortgage Lending Market …
OCC – Unfair and Deceptive Practices
American Bankers Association – Unfair Acts and Deceptive Practices
Comments on this entry are closed.