Welcome to the LFI Blog.  The purpose of this blog will be to update readers on current trends in the foreclosure crisis.  It will be updated as time permits.

Oct 26, 2009

I apologize for not posting more the past few days, but things have been going fast and furious.  I think the arguments for unlawful foreclosures in most California Homes handled by MERS is ready to be used by attorneys.  It makes much sense. Just have to add new court cases and statutes to it, but even now, it is impressive to the attorneys who have already seen it.

http://iamfacingforeclosure.com/blog/2009/10/26/will-option-arm-loans-still-implode/

This article explains in great detail how the Option ARM worked, and why the upcoming implosion will hit next year and in 2011.  When it does, housing will not be pretty.

A thank you to Aaron Knowle of ML-Implode fame for allowing me to post articles on his website.

Next article will be explaining Securitization in detail.  It is something that attorneys need to understand.  After that, I will likely write about the new arguments regarding unlawful foreclosure.  All previous articles have been to set the stage for this.

Oct 23, 2009

Great News

Attorney George Taggart in Sacramento had an Unlawful Detainer hearing yesterday for a client I did an audit for.  The judge did "entertain" other arguments that just possession of the property.  Issues that I had found regarding the Substitution of Trustee and the Assignment of Beneficiary, or lack of, was presented to the court.  The judge postponed the UD for 60 days, so that the lender could find the "missing" Assignment of Beneficiary.  The Assignment goes right to the heart of Legal Standing in this case.

What will be interesting to watch is when they "find" the missing Assignment.  I know for a fact that most of these Assignments are signed and recorded long after they should have been executed. In fact, they are usually invalid, if one knows how to argue the issue.  When it is found, it shall be fun to review it, because I can almost always show that they are fraudulent.

Oct 22, 2009

I just installed Windows 7 on the corporate computers.  7 does not come installed with an email client.  I did not back up emails, so I am having to try and figure out how to get them back.  They are buried in Windows mail, but it is a mess to recover.

If you are going to Windows 7, create a text file of your contacts, and also same important emails.  Do it right and you can use the Windows Live mail, or download an email client and import to the program.  

This has screwed up my entire day.

The good news is that so far, 7 is better than Vista.

Oct 19, 2009

The start of another week, and here we go again.

From the same people who brought you the Housing Crisis, another product designed to "protect the value" of your home........."a not as insurance" insurance policy for dropping property values in your home.

http://www.nytimes.com/2009/10/18/realestate/18mort.html?_r=2&ref=realestate

I can already see all the likely problems with this.....especially when it comes to paying off the property value losses.  

Mish on Goldman Sacs

Goldman Sacs, the company that "bought" the Treasury Department, and has been one of the worst offenders in creating the Housing Crisis, is once again in the target hairs of Mish, and well that they should be.  

http://globaleconomicanalysis.blogspot.com/2009/10/where-hell-is-outrage.html

Another Steaming Pile of Poop

Marketwatch is proclaiming better times in the  Housing Market are coming soon.  Guess that they did not get the memo that there were almost 350,000 Notice of Defaults filed in September alone.

http://www.marketwatch.com/story/positive-news-expected-in-housing-reports-2009-10-18

Are we repeating the 1930's?

A comparison of today to the 1930's crash.

http://online.wsj.com/article/SB125581121032292239.html?mod=rss_Today%27s_Most_Popular

Oct 15, 2009

IMPORTANT BREAKING NEWS:

Breaking out of Southern California.......a judge has issued a TRO & PI Order to Show Cause,  stopping likely almost all foreclosures and Trustee Sales against Aurora with Quality Loan Services as Trustee.  The issues cited are issues I have argued, and apply to almost all Notice of Defaults filed in CA.  It refers to the Declaration in most NOD's about contacting the borrower.  The persons signing the NOD have no personal knowledge of the attempts to contact, and therefore, I have argued that with lack of personal knowledge, the NOD is unlawful.

Add to this case, US Bank vs Ibarez, from Mass.  It supports another position that I have always held.......if the assignments and recordings of the Note as dictated by the Pooling and Servicing Agreement are not executed, and the note is endorsed in blank, then how can MERS be lawfully foreclosing?  What authority do they have? Who does have the authority?

Can the dam be breaking?

Email me at Patrick@loanfraudinvestigations for a copy of the TRO and the US Bank vs Ibarez decision.

(If you are an auditing firm, and I know that many of you read what I write, don't email me for the case.  Do your own research for a change.  Sorry, could not resist that.  LOL)

These new cases means that I will spend the weekend updating the audit with all the new case law and arguments.

Today's readings:

If I see another National Association of Realtor's press release or spokesman talking about the Housing Recovery, pundits and news people saying that the Crisis is abating, or HAMP is working,  I am going to scream.  It is not getting better.  Take note of these readings.  First and foremost is from Mark Hanson, aka Mr. Mortgage. It is heavy in  numbers and graphs, but that is the best way to present the evidence.  (I really like this guy.  He gets it.)

http://mhanson.com/blog

For an easier read about the Crisis, try this from CNN Money.

http://money.cnn.com/2009/10/15/real_estate/foreclosure_crisis_deepens/?postversion=2009101507

Mish Shedlock weighs in as well.

http://globaleconomicanalysis.blogspot.com/

Oct 14, 2009

Court Today

I will be in court today, for an Unlawful Detainer.  The attorney asked me to present my findings from an audit.  This shall be very interesting because as I testify, I will be able to determine reaction to some new arguments that I will present.  These reactions will help me form additional arguments, refine them, or adjust them in weak areas.  That is something that  most other "auditors" do not understand or get the opportunity to do.

I view court as a "learning experience".

Update

Well, that was  a waste of time.  I had heard that with Unlawful Detainer's, the Court only cares about "legal" possession of the home.  This Court saw the Trustee Deed upon Sale and would not entertain any other issues.  This was even though the client had a lawsuit going in Federal Court.

If you are an attorney going against a UD, file a Motion to Consolidate, if you have a lawsuit.  

Oct 13, 2009

Home Rescue Plan Delaying, Not Solving Crisis

http://www.reuters.com/article/domesticNews/idUSTRE59C00620091013?pageNumber=3&virtualBrandChannel=11621

An excellent article on how HAMP and other loan modification plans are not working.  

Fitch See 60% of Current RMBS Borrowers Underwater

http://www.housingwire.com/2009/10/13/fitch-sees-60-of-current-rmbs-borrowers-underwater/

More evidence that the Foreclosure Crisis is not over.

Home Evidence Expected to Fall 10% Nationally

http://www3.signonsandiego.com/stories/2009/oct/13/home-values-expected-fall-10-nationally/?business&zIndex=181662

10% national drop in values.   I don't believe it.  It will be much more.

Mish Shedlock on Foreclosures

Mish writes a great article about the foreclosure crisis and how upper value homes are now defaulting.  One thing  to note is that when you hear home values are increasing, it is not the result of actual price appreciation.  Instead the companies promoting such appreciations are only looking at the median price.  This price is the result of larger homes now selling at higher prices that the median, which drives up the median price.  Median price is the average of all sales, so you can see why higher priced homes would distort the median average.

Mish does note the upcoming Option ARM implosion, which I have just finished writing about and will be posted later today to www.iamfacingforeclosure.com.

Oct 12, 2009

SB-94 was signed by the Governor.  It takes place immediately. Most loan mod companies will be put out of business by this action, since they do not have the "dep pockets" to continue.

Attorneys are already prepared to go to court if the state tries to prevent them from collecting advance fees.  The argument will be that they litigate, and do not do loan mods. By restricting the attorney from collecting advance fees, then the homeowner will be deprived from their day in court, since attorneys will not do any actions on a contingency basis.  This would be a Constitutional violation.

SB-94

The Governor has signed large numbers of waiting bills last night. He also vetoed large numbers as well.  

There is no word yet as to whether he signed SB-94, the bill that would put most loan mod companies out of business in CA.

B of A and Loan Mod attempts

The Washington Post writes of the problems that B of A is having in executing loan modifications.  Partial claims are a lack of staff and also issues with the computer systems. 

http://www.washingtonpost.com/wp-dyn/content/article/2009/10/11/AR2009101102206.html

I don't "buy" the excuses.  I hear too much and know too much about what is going on.  B of A and other servicers do not want to do loan mods, and are deliberately stalling on doing mods.

There is one company that pays its loan mod reps $1 per call that does not last longer than 5 minutes.  That could be $12 per hour more for the employee.  With that incentive, do you think that the person is really going to help a homeowner?

Oct 11, 2009

Martin Adelman writes about the Servicers doing nothing, but getting billions of our tax dollars.

http://mandelman.ml-implode.com/2009/10/chris-adams-writer-for-mcclatchy-newspapers-gets-it-servicers-suck/

He also hammers an attorney for Consumers Union regarding her wanting the Governor to sign AB-94 and AB-764.

http://mandelman.ml-implode.com/2009/10/norma-garcia-consumer-reports-magazine-stupid-is-as-stupid-does/#

As mentioned before, I have mixed feelings regarding this legislation.  It will certainly remove most loan modification companies from doing mods, which is needed because the majority of these companies are acting solely out of their own interest or are scams, and not doing the homeowners any good.  But, I think that the claims of it not allowing attorneys to charge upfront fees is stretching the reading of the bill.  Most attorneys litigate and mediate.  They  do not simply do loan modifications.  If the CA government attempts to prevent the attorneys from charging an upfront fee, then I personally know of many attorneys who will be filing lawsuits against the government and the bill.  The reasoning is that by denying an attorney the right to charge an upfront fee, the attorneys will not take the case.  Therefore, a homeowner is being denied his day in court, if litigation is necessary.  This could end up being a major constitutional issue.

As of this moment, there is still no indication that the Governor and the legislature have made any progress on the Delta Water issue.  This is important because the Governor has indicated that he will not sign any of hundreds of bills on his desk until the issue is decided.  SB-94 is one of the bills being held hostage. 

Oct 10, 2009

I thought that it would be of interest to show what can actually be determined through"true" forensic auditing.  Below is an actual FHA Desktop Underwriting approval. If one just looked at the approval, it would seem that the loan had no real issues.  After you review the approval, of which only the first page is available, I will explain what can be determined from the approval.

Now that you have had a chance to review the approval, it is time to fully explain my findings, if I was doing an audit on this page only.

1. The loan is an Adjustable Rate Mortgage, starting out at 4.25%.
2. The Mortgage Interest Premium adds .50% to the loan, for an effective rate of 4.75%.
3. Borrower is paying 1.75 points upfront, for the Upfront Mortgage Insurance Premium. 
4. It is unknown how many points the broker has charged the borrower.
5. Total Debt Ratio of 53.40%.
6. The Judgement would indicate as least some credit issues.
7. 67.61% Debt Ratio would indicate that there are certainly other credit issues, since the borrower is going FHA and not Conventional.
8. At some point in time, the loan will adjust.

Broker down into a simple summary, I would conclude.

• The borrower had credit issues that precluded going into a conventional loan whereby the borrower would not be paying the 1.75 points for the Upfront Fee or a .50% mortgage insurance fee yearly.
• The Debt Ratio of 53.40% is far above the standard guidelines for FHA or Conventional loan approval.  The Debt Ratio would indicate that there would be issues in repayment ability of the loan.  Under typical circumstances, the loan should have been declined. 
• The only reason that this loan was approved was the result of the 67% loan to value as a "compensating factor".
• Once the Interest Rate adjusts, and it will adjust upward, the borrower will be in even worse financial trouble.

The end result is that this loan should never have been approved. The borrower will be paying total debt service of 53.40% of income.  This means that for every dollar earned, .53 cents would immediately go to paying bills.  To make matters worse, the 53.40% is based on Gross Income before taxes.  As with most people, if we consider that after all income tax and FICA deductions, the total income withheld was approximately 33%, that means the borrower will bring home .67 cents of every dollar.  Subtract the .53 cents and the borrower has only .14 cents of every dollar left over. For every $1000 per month earned, he will have $140 left over for monthly living expenses. If he makes $5,000 per month, that means he has $700 left over.  From that $700, he will have to spend it on:

• Food
• Utilities
• Fuel for vehicle
• Clothing
• Auto insurance
• Medical Expenses
• Other various expenses

It now becomes blatantly obvious that this borrower is a "train wreck" waiting to happen.  It is only a matter of time where he will be in financial trouble with Default and Foreclosure looming. This borrower should never have been approved for this loan.

There are two points that you should take away from this post.

• True Forensic Auditing is much more than TILA/RESPA for saving homeowners.
• The lenders are still approving loans that should not be approved.  FHA is the new Subprime.  And more foreclosures are coming.

FHA Bailout

Former Fannie Mae executive says that FHA will need bailing out in 2-3 years, but FHA denies that it is so.  Where have we heard this before?

25% of all loans made this year were FHA.  Almost always, there is less than 5% of a down payment.  The borrowers have low credit scores.  Debt Ratios of 45%. 

Currently, FHA is facing increasing numbers of defaults, and even worse, many of these are what is known as "first payment defaults", where the first mortgage payment due is never even made.

By law, FHA is required to carry "reserve funds" to cover up to 2% of its loans in case of losses.  These funds are derived from the FHA Mortgage Insurance Premium paid on every loan. However, since far greater numbers are already in default, this 2% number is not going to last much longer.  There are other reserves available, but with what is coming, those funds will disappear also, very fast.

That does not leave much to the imagination as to where FHA is headed.

Treasury Program not working to spur loan mods

Treasury report says that $50 billion program will help prevent 3 - 4 million foreclosures.  Remember the Superman Comics and Bizzaro World, where black was white, and white was black?  With the events going on daily, I feel that I live in that world.

http://www.bloomberg.com/apps/news?pid=20601206&sid=aYG9i40uKL0M

Every day, I see the results of the Treasury Program.  It is not working.  If the Servicer is Indymac, you might as well hire an attorney and file the lawsuit.  Otherwise, start packing.  Every legitimate loan mod company is having problems with them and cannot get mods done.  

If the Servicer is Wells Fargo, most likely you will be told that a loan mod offer is coming, and when it arrives, it is a forbearance. You will be required to pay a substantial amount of past due money upfront, then make 4-6 payments at an increased monthly payment, higher than what you were making.  Then, you would pay the last of the past due amount in a lump sum.  However, after 4 months of payments, you will be evaluated for a loan mod, if you were successful. 

After your 4-6 months of on-time payments, you expect the loan mod is coming.  Guess what?  You get a letter denying the loan mod. No reason is given. Just pay the rest of the past due amount.  What is the real unannounced reason for the denial?  You proved that you could make the higher payments, so you don't need the loan mod!!!

BTW, I have it on good authority that I trust, that one lender gives out a fax number for sending documentation for loan mods, that when the faxes are received, the machine is tied straight to a shredder that immediately destroys the fax.

Another lender provides an email address for contact, but the address is a dead end, with no one designated to ever check the emails.

Welcome to reality.

Oct 9, 2009

Latest email came in from that other audit company a couple of cities away from me.  "Just today, 2 for 1 special". 

They never did reply to the email that I sent them stating that if they did QWR's or contacted the lender for any reason, they fell under DRE's interpretation of the California  Foreclosure Act.  Oh well.......

Oct 8, 2009

Gov. Schwarzenegger not signing bills -  AB-94?

http://www.dailybreeze.com/ci_13494097

The governor is not signing hundreds of legislative bills until the Delta Water situation is cleared up.  He has until Sunday night to sign these bills.  Among them is SB-94, the bill that restricts loan modification companies from charging advance fees for doing mods.  The banks are not going to like you if you don't sign, Arnold.  

HAMP reaches 500,000 loan mods

HAMP now has 500,000 loan mods in progress, or so it is claimed.  I don't buy it.......

http://www.housingwire.com/2009/10/08/hamp-reaches-500000-modification-milestone/

 As of Oct. 1, servicers participating in HAMP offered 757,955 trial modifications, up from 570,000 trial modfications offered by the end of August 2009, according to the latest performance report from the Treasury.

What is wrong with the above stated numbers?  Just August and September would mean 1.2 million plus trial modifications and not 500,000.  To further show the problems, each trial modification is for 3-4 months.  So what happened to 700,000 plus modifications that are "no longer in progress"?

Do you think that the US Government might lie to us?    Nah...........not Uncle Sam.................

Federal Preemption and the Housing Crisis

Barry Ritholtz links to a University of North Carolina study where it is claimed that Bush, in 2004, changed laws that strengthened Federal Preemption of State Banking Laws.  Sorry Barry,but there are flaws in the study.

http://www.ritholtz.com/blog/2009/10/pre-emption-of-state-anti-predatory-lending-laws-led-to-more-foreclosures/

There was major changes made in banking laws in the late 1990's.  The changes were instigated by the banks who had recently been allowed to engage in banking across state lines.  Additionally, repeal of a portion of Glass-Steagel allowed for commercial banks to conduct investment banking and engage in insurance operations.  This allowed for many of the mergers that occurred later.  (Countrywide, B of A, and all the usual suspects were present.)

The banks began to complain that they could not operate all of their out of state branches in a consistent manner since so many states had different regulations regarding lending and anti-predatory.  So Congress, in their infinite wisdom, and through the receipt of large amounts of contributions from the banking and investment lobbies, created legislation that enhanced the powers of the Federal Government, Office Of the Comptroller of the Currency, Office of Thrift Supervision, FDIC and other agencies to overrule state banking laws.  State Predatory Lending laws became ineffective and the rest is history.

 The BK Courts are our friends.  MERS loses in Southern CA.  Judge Buford Strikes again.

The BK Courts in Southern California are now taking up the battle.  A BK Court has ruled that MERS has no legal standing to request a Stay from Bankruptcy. 

LOS ANGELES BANKRUPTCY COURT REFUSED TO ALLOW MERS TO FORECLOSE ON MORTGAGE

FACTS

MERS filed a motion for relief from the automatic stay in bankruptcy to allow foreclosure to continue on a debtor's real property. The court denied the motion for the following reasons:

1.      MERS cannot join as moving parties for relief from stay to continue the foreclosure "its assignees and/or successors in interest." See FRCP Rule 10(a), Federal Rules of Bankruptcy Procedure, Local Rule 1002-1(a)(8). 1002-1 requires the actual movants be named to compare against Schedule A list of reel property and Schedule D list of creditors holding secured claims and to permit the judge to determine if he should recuse (remove) himself from the case.

2.      Since notes are sold on the market and securitized, MERS has not proven it has the authority to act as the agent of the current holder of the promissory note. To seek relief from stay MERS must show proof it has authority to act for the current holder of the note.

3.      The mortgage always follows the promissory note. Cal. Civ.C. §2936. Transfer of the note carries with it transfer of the security for the promissory note without and formal assignment or delivery or mention of the same. Carpenter v. Longan, 83 U.S. 271, 275 (1872). Thus mortgage cannot have a separate existence from the note and an assignment of the mortgage alone is a nullity. Carpenter at 274. The note is essential and the mortgage is only an incident to the note. Id.

4.      Presuming the original holder of the note and transferred it, MERS is no longer the authorized agent of the holder unless it has a separate agency agreement with the new undisclosed principal.

5.      Using computer records to show the balance owed must comply with an 11-step foundation not done here. In re Vinhnee, 336 B.R. 437, 444(BAP 9thCir. 2005)

6.      First prove the authenticity of the promissory note and then MERS must prove it has the authority to enforce it. Use Fed. Rules of Evid. 901.

7.      Only the holder of the note may enforce it. Cal. Com. Code §3301. The note is enforced by making a demand for payment by the holder or its authorized agent. Cal. Com. Code §3501(b)(2).

MERS is not in the business of holding promissory notes. Its sole purpose is to act as mortgagee of record for mortgage loans that are registered on the MERS System, a national electronic registry of mortgage loans.

Motion denied. (In re Raymond Vargas, U.S. Bankruptcy Court, Central District Cal., LA08-17036SB, Samuel L. Bufford Judge.)

Oct 6, 2009

Getting quite a response from attorneys who want to be a part of the coming forum.  It should hopefully be ready by the weekend.

Been busy today reviewing audits for attorneys.  Unfortunately, I had to let one attorney know that I found significant borrower fraud with two loans.  This is extremely important for the attorney because if the attorney is considering a lawsuit, then if not reported, the attorney could end up being liable for paying the lender's costs and fees of litigation.  It is also important for the homeowner to be aware of what the lender is likely to argue in their defense.  In this case, the lender would likely win in the courts, so it means that the attorney will just have to try for a loan mod without the threat of litigation.

 I am only aware of two other audit firms will report this to attorneys.

Now, on to other items of interest.

Update on that other Audit Firm in Northern California

I received a forwarded email from the firm.  It was promoting audits, today only, for $395 each.  They are targeting people in the loan business.  Bad email targeting.  Furthermore, they promote:

" By re-selling our audits you are able to collect and make money upfront without violating any advance fee regulations. "

Once again, we see the same people who created this mess, trying to make money with no regard for the homeowner who they are purportedly serving.  Meanwhile, they are casting the true audit professionals in a bad light.  Fortunately, those who have compared their audits to the LFI audits, understand the difference.

Call this drinking the Kool-aid

Deutsche Bank, one of the entities involved in Loan Securitization, calling the US Economy on the mend.  Housing is improving and close to a turnaround because inventories have lessened.  Obviously LaVorgna has not been following the true foreclosure market and shadow inventories, nor how HAMP and other programs have only delayed foreclosures for a period of time.  Fool me once, it is your fault.  Fool me twice, and I am the idiot.

http://www.bloomberg.com/apps/news?pid=20601206&sid=an1vxMc2SMEU

File this under Old News

Many people and I were saying at the beginning of 2008 that FHA was all there really was for lending, and it was the new Sub-Prime loans, because of the borrowers it was approving.  FHA defaults are now climbing and reaching disconcerting levels.  The author is now only reporting this.  Boring...........

http://www.housingwire.com/2009/10/05/fha-is-replacing-securitization-in-mortgage-financing/

Finally, someone else who gets it, at least some of it

This is a good article and interview which reinforces much of what I have been saying for two years.  It is worth checking.  However, I am now mad at her.  She has forced me into working on an article that I have been putting off.....tying all the factors that caused the housing crisis into a timeline and the effects.  No one has done that yet, instead only focusing on portions of the causes.  It is like having a major illness, but only looking at the fever, and missing the rest of the symptoms.

http://georgewashington2.blogspot.com/2009/10/janet-tavakoli-tells-truth-to-imf.html

Oct 3, 2009

I spent yesterday out of the office.  I had meetings with several attorneys in Windsor CA.  Great meeting.  We discussed measures to bring a unified approach to dealing with lenders and servicers.

Most important, we laid the ground work for several Class Action lawsuits that we have in mind.  The only issue is finding a LARGE Class Action Law Firm with the structure in place to handle what will come at them.......fast.

If anyone has ideas on such a firm, please contact me at

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Oct 1, 2009

Update on the Audit Company Below

I posted yesterday an item about an Audit Firm in Ca who was looking for Sales Agents who could make from $1,500 to $1,900 per client ordering an audit.  I was just forwarded an email that this same company sent out today.  It is offering an " Audit for $450", good for only today.  This offer includes a QWR, Qualified Written Request.

If they are charging $450 for an audit, then it shows how ethical the company is if they are offering to sign up Sales Agents who will receive $1500 per audit.

I speak regularly with the CA DRE.  They advised me that ANY contact with a lender or servicer by an Audit Firm,  even a QWR, means that the firm falls under the coverage of the California Foreclosure Act.  They must have an Advanced Fee Agreement approved with the CA DRE for collecting fees up front, before the work is done. A check of the DRE Website found that there was no Advanced Fee Agreement.

There you have it.  A loan auditing firm who is looking for violations of State and Federal Law, is violating the law themselves.  Talk about the kettle calling the pot black.

Note:  The $450 for the audit also confirms that they are still doing the Software Audit as before.  Some things may have been added, but it is still essentially TILA/RESPA.  Another waste of money.

Case-Schiller Index

The Case-Schiller Index is a well-known index that many people follow to track the housing market.  I have been less than pleased with its reports the last couple of months because the report seems to indicate that the housing market is in recovery.  The Wall Street Examiner conducts a very good analysis into the methodology of the Case-Schiller and reports some issues with how the Index is derived that I find to be credible.

http://wallstreetexaminer.com/2009/09/30/case-chiller-false-phony-and-fictitious/

Wells Fargo Strikes Again

Once again, I have an audit staring me in the face whereby Wells Fargo was the Servicer and the homeowner was attempting to do a loan modification.  It is a repeat of stories that I have heard for two years involving Wells Fargo.  Here are the events of the case. Note the losing of documents, the lack of effort to work with the borrower, and the general disregard for assisting the borrower.  This happens daily with Wells Fargo and it is why LFI is adamant that borrowers work with an attorney to assist them with foreclosure problems.

 November 2008, borrowers called Wells Fargo to inquire about getting a modification of the home loan.  The Wells Fargo representative promised to send them  a loan modification package, which they received on November 18. Borrower filled out his forms and faxed his completed documents back to Wells Fargo on or about November 19, 2008.

March 24, 2009, Wells Fargo denied the request for modification on the grounds that  income was too low.

Borrower's business increased, from approximately $9,560 per month to approximately $14,100 per month since Nov;  Borrower faxed updated profit and loss statements to Wells Fargo reflecting this fact on or about Mar 25.

Concerned about the length of time that elapsed between the dispatching of his documents to Wells Fargo and receiving a response from it, borrower made phone calls on a regular basis (sometimes weekly) to Wells Fargo’s offices to check on the status of his application.  He also asked whether he should get an attorney on several different occasions. Each time he called, Wells Fargo assured him that it would work with him to secure a loan modification and that there was no reason for him to retain an attorney.

On or about May 7, 2009, in a phone conversation, Wells Fargo informed borrower that his application was again denied as it never received an updated profits and losses statement.  This was the first time Wells Fargo informed borrower that it did not receive his fax of March 25, 2009.  He immediately resent the fax.

Borrower called Wells Fargo again on or about May 13, 2009 and was assured that Wells Fargo was reviewing his information and would get back in touch with him.

  On or about May 15, 2009, Wells Fargo informed borrower that his home would be foreclosed and be put up for sale.  Defendant Wells Fargo promised to get back to borrower with details.

Borrower had not heard anything from Wells Fargo by May 17, 2009, so he called again.  During this conversation, Wells Fargo promised him that the sale would be postponed.

On or about May 18, 2009, borrower requested a copy of the original March 2005 refinance agreement and related documents. Wells Fargo sent him a copy of what turned out to be someone else’s package, including their note and deed of trust.

On or about June 15, Wells Fargo finally initiated a contact with borrower, informing him that a contract was prepared for a loan modification.  Wells Fargo promised that the contract would be shipped overnight to borrower.  Wells Fargo declined to provide specifics of the contract’s terms over the phone, but stated that it would require an approximate payment of $7,500 up front and included a modification of the loan and loan payments.

The next day, the promised contract did not arrive.

On or about June 25, borrower was informed that his home would be offered for sale on or about July 17.  After more phone calls to  Wells Fargo, Wells Fargo promised to postpone the sale again.

  As of June 25, 2009, borrower had still not received the loan modification contract that  Wells Fargo promised had been shipped overnight on June 15, 2009. 

On or about July 24, 2009, borrower received a correspondence, via regular, first class mail from Wells Fargo.  Contrary to what borrower had been promised on the phone, the document was not a loan modification at all, but merely a forbearance.

Borrower called Wells Fargo again on or about July 31 to inquire about the original contract. Wells Fargo claimed to have no knowledge as to the contract, but confirmed that the contract would be a “piggy back option” with an up front payment of $7,446.58.  Wells Fargo promised to investigate what happened to the original contract and to call borrower back.  Wells Fargo never called back.

Borrower called again on or about August 3, 2009. Wells Fargo again promised to investigate what happened to the original contract and to call borrower back. Again, Wells Fargo broke its promise to return borrower's call.

On or about August 7, 2009, borrower called yet again and informed Wells Fargo as to his disappointment that Wells Fargo promised him a loan modification, but then sent him a “forbearance.”  Wells Fargo then suggested that borrower begin the process all over again.  

Taking Wells Fargo’s advice at face value, and since  Wells Fargo assured borrower that it would work with him to secure a modification, borrower sent a revised application on or about August 8, 2009 reflecting his latest monthly income figures.  He faxed three copies to Wells Fargo and mailed a copy via the U.S. Postal Service, certified, return receipt requested.  He never received any acknowledgment of receipt.

On or about August 13, 2009, borrower called Wells Fargo to check on the status of his application.   Wells Fargo stated that it would be necessary to cancel the information that borrower sent in the past. Then, and only then, would Wells Fargo be able to consider his “updated information.” By “updated information,” it was understood by borrower to mean the information he faxed to Wells Fargo on or about August 8, 2009.

In a subsequent phone call on or about August 17, 2009, Wells Fargo said that there was no news on a loan modification. At this time, borrower demanded to speak with an individual more knowledgeable as to his situation. Wells Fargo refused and informed borrower that he could only speak with call center representatives.

At all points during these months of procrastination by Wells Fargo, the borrowers were prepared to settle on their mortgage payments and resume regular payments as soon as an agreement could be reached on a modification, which Wells Fargo had represented to them as forthcoming.

Sale of Home

On or about August 21, 2009, borrower called Wells Fargo and was told that his home was scheduled to be sold on or about August 24, 2009. Wells Fargo informed borrower that there were no files to review for his mortgage.  Borrower asked what he could do. Defendant Wells Fargo said that it did not know.  Borrower placed several more phone calls that day. During his third call of the day, Wells Fargo said that it found his file and that it would write a note to speed the review.

Having heard nothing by August 24, 2009, borrower called again.  Wells Fargo promised that it would attempt to stop the foreclosure sale. Wells Fargo said that it would send an email to the negotiator to stop the sale and review the new financial information.

On or about August 24, 2009, Wells Fargo sold home to  U.S. Bank National Association.

Sep 30, 2009

Audit Companies

Received an email today from a California Auditing Firm.  The firm was offering positions to former and current loan officers and real estate agents positions as Sales Agents.  For each client that was brought in, the Sales Agent would earn a commission from $1,500 to $1,900 per client.  These clients would likely be from the loan officer's former clients.

I find this absolutely reprehensible.  The loan officers who will sign up for this  program are the same loan officers who were directing their clients into the bad loans in the first place, and now instead of helping them, they are simply trying to make more money off of desperate homeowners.

There are likely two possibilities of how this firm is operating:

• The "Sales Agent" has the option to charge whatever price he desires above the actual cost of the audit, and that will be his profit.
• The firm does private labeling, so a company is created which purportedly will do the audits.  Again, the Agent is able to charge what he desires for the audit.

To add to my concern, what are the actual fees for each audit?

The firm does claim to have attorneys that they can refer the client to who will do a loan mod for the client for $1,500 additional in fees.  I know how much work is involved in loan modifications, and $1,500 for a loan modification is NOT going to cover the costs for the attorney.  I know of attorneys who have started out charging that much, and they found that they could not do the work at that cost. Most have raised fees, or left the business.

Obviously, the audit firm will claim that they do most of the work for the attorney and that is why the cost for the audit is high, and the attorney's fee is low, but I know the firm's product very well, having had attorneys who have used the product call me for explanations of the findings or have had me redo the audit.  Also, one person on their staff, prior to going to work for the firm, worked for an attorney and called me with questions about their audit, and not them.  

Go figure.

I do admit that LFI has former loan officers and real estate agents who refer clients to us.  However, LFI does not pay any referral fee to these loan officers. Nor do we hire "Sales Agents".  We do have one couple who works for us part time in marketing, but even then, I go out and personally meet with any attorneys that they find to work with LFI.  The purpose is to find if LFI and the attorney are a "proper fit". And, when a homeowner calls requesting an audit, LFI finds out if they plan on using an attorney or trying to get the loan modification on their own.  If on their own, we will NOT do the audit.  The reason is that an attempt by a homeowner to us an audit for a loan modification without an attorney will likely result in failure

In conclusion, when looking at an audit company, use caution. And know this, if you are paying more than $500-$600 for an audit, it had better contain information on Securitization and pertinent data regarding your foreclosure.  If not, you are paying too much.

 (BTW, want to find out how good the firm is?  Ask them to go into detail on securitization, the Pooling and Servicing Agreement, credit default swaps, etc.  If they do not appear to know anything about those subjects, you are talking to a firm that is missing the "Big Picture".

Securitization 

The following website link has all that you need to know about how the securitization process worked in reality.   It is simplistic and funny.....and sad. I will write up a full article within the week to fully explain the process in detail.  In the meantime, this gives you a perspective.

  http://docs.google.com/present/view?skipauth=true&id=ddp4zq7n_0cdjsr4fn

Sep 28, 2009 

 I have just finished submitting an article to http://iamfacingforeclosure.com.  It is likely to be ready to view Wednesday.  It concerns auditing.

 http://iamfacingforeclosure.com/blog/2009/09/30/forensic-loan-audits-debunked-demystified/

Other articles previously submiited:

This article talks in depth about MERS

http://iamfacingforeclosure.com/blog/2009/09/24/the-trouble-with-mers/

This article explains why loan modifications are difficult to receive

http://iamfacingforeclosure.com/blog/2009/08/26/why-aren%E2%80%99t-lenders-doing-more-loan-modifications/

This article explains the issues with attempting rescission in California, Florida, Nevada and Arizona.

Shadow Inventory

Mark Hanson, a leading writer on the Mortgage Crisis since Mid 2006, reports on Shadow inventory.  It is well worth the read.

More on MERS

An article from the NY Times on the Kansas decision on MERS.  The author really does not understand the ruling. But most important, as I had predicted, MERS is going to appeal. 

Sep 27, 2009

Roots of the Crisis?

From the Washington, an artiicle on the Federal Reserve Bank and the Subprime crisis.  

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/26/AR2009092602706.html

From Housingdoom.com

http://housingdoom.com/2009/09/26/uncle-sam-and-the-housing-crisis/

I will have more to say on these and other articles later today.  Most of these articles miss the "Big Picture" because they only focus on parts of the problem, not the full scope.  For example, there are those who blame the Community Re-investment Act, the Clinton's, the Fed, the banks or the brokers, real estate agents and borrowers.  The true story is much more complex.  

Here we go again. 

They never learn.  Another MERS coming.  I guess that once was not enough.

http://www.housingwire.com/2009/09/25/securitization-group-launches-code-to-track-loans/

Sep 26, 2009

Attorneys,

Please read the letter from Pat at this link.  http://www.loanfraudinvestigations.com/join-us

The letter announces the concept of forming an Alliance that will allow attorneys to work and share what is working and not working for attorneys across.  It will also serve as a means of announcing items of interest and new methods of attacking lenders.  I urge all attorneys to carefully consider the concept.  Already, many attorneys have expressed interest in the idea.

SB-94 - Loan Modification Bill

SB-94, the Senate Bill that affects loan modification companies and those companies that claim to be attorney-affiliated, but are not Law Firms, has passed and been forwarded to the Governors desk for signing.  The Governor has indicated that he would not sign this bill unless it affected attorneys also.  So the signing of the bill is in doubt, as I will explain later.

This bill, if signed into law, will make it unlawful for loan modification companies to accept Up-Front fees for services.  They will only be able to accept payment AFTER all contracted work has been satisfactorily completed. 

 The link to the bill is:

What does this mean for the homeowner?  If the Governor does sign this law, and it is in doubt, you can expect:

Moost loan modification companies will cease doing business in California.  That is because most companies do not have the cash to operate for any length of time under the new law.  Servicers will ensure that any loan modification companies continuing to operate will soon be out of cash.  They will stall on each and every loan modification dragging out the length of time to finish the modification, until the last moment.  As a result, the remaining loan modification companies will cease to exist.

Out of State companies will continue to try and do business in California, until the Attorney General takes action.

 As I indicated earlier, the Governor has indicated that he would not sign a law that did not cover attorneys.  However, the legislature has not made a true attempt on the face of things to appeal to the Governor.  As can be seen by the statutes, attorneys will be able to continue with mods, and charge up-front fees.

Civil Code 6106.3. (a) It shall constitute cause for the imposition of  discipline of an attorney within the meaning of this chapter for an  attorney to engage in any conduct in violation of Section 2944.6 of the Civil Code.

2944.6. (a) Notwithstanding any other provision of law, any person who negotiates, attempts to negotiate, arranges, attempts to
arrange, or otherwise offers to perform a mortgage loan modification or other form of mortgage loan forbearance for a fee or other
compensation paid by the borrower, shall provide the following to the borrower, as a separate statement, in not less than 14-point bold
type, prior to entering into any fee agreement with the borrower:

"It is not necessary to pay a third party to arrange for a loan modification or other form of forbearance from your mortgage lender
or servicer. You may call your lender directly to ask for a change in your loan terms. Nonprofit housing counseling agencies also offer
these and other forms of borrower assistance free of charge. A list of nonprofit housing counseling agencies approved by the United
States Department of Housing and Urban Development (HUD) is available from your local HUD office or by visiting www.hud.gov. "

Based upon a reading of the Statutes, attorneys will be able to continue in business, and rightly so.

LFI has mixed feelings on this bill.  It was recognized that abuse in the Loan Mod business existed and in ever increasing numbers.  However, in my opinion, if the California Department of Real Estate had been given more resources and enforcement personnel, then these rogue companies could have been shut down.  Instead the California politicians have stepped in and once again over-reacted, and in doing so "has thrown the baby out with the bath water".

The actions of the California legislature has ensured that the Servicers will be more abusive to homeowners.  (BTW, I should note that I firmly believe that this bill was instigated by the banking and lending industry.)  As a result, the attorneys will be forced to file more lawsuits to fight the Servicers.

The fight continues..............

Sep 24, 2009

MERS Ruling

A ruling recently came out of a Kansas Courtroom regarding MERS.  You are likely to see much posted on this ruling in the next few days and weeks.  Already, many are proclaiming that MERS is "dead", and some even claim that "millions will get their homes free and clear.  Don't believe such comments when you see them.

This ruling is State Specific.  It is for Kansas only.  It does address many specific issues with MERS, as I have detailed in an article I have written and posted at http://lamfacingforeclosure.com  The article should be available for review later today.

The problem with this case is that Courts must look first for rulings in their own jurisdictions and then if no applicable case law exists regarding that, then they can go outside of their jurisdiction.  There has been much case law regarding MERS, both positive and negative, that will have to be addressed and "disarmed" in future arguments.  The arguments from the Kansas Case will have to be "dissected" and then applied to the specific state.

See here for the actual ruling, http://www.kscourts.org/Cases-and-Opinions/opinions/supct/2009/20090828/98489.htm

To give an idea of how jurisdiction matters, there is Case Law coming out of the 4th Circuit Court of Appeals and the 9th Circuit Court of Appeals regarding an issue of rescission of a loan.

A homeowner refinanced a purchase money loan into a new refinanced loan subject to TILA.  Within two years, he refinanced again into another loan.  He attempted to rescind/cancel the previous loan for TILA violations.  The 4th Circuit Court ruled that the TILA rescission was applicable, even though that loan had been paid off.  The 9th Circuit ruled in similar cases that the rescission was not valid since the loan had been paid off. In California, an attempt to rescind a loan that had been paid off would be subject to the 9th Circuit ruling and not the 4th Circuit ruling.

This provides a vivid example of why people should remain calm about the Kansas case.  The particular arguments will need to be taken and incorporated into CA pleadings in such a manner as to render ineffective earlier case law and CA statutes.  The good news is that much of the ruling can be supported through CA statutes.