Monthly Archives: July 2011

Audit of the Federal Reserve Reveals $16 Trillion in Secret Bailouts



This is from the newsroom of Senator Bernie Sanders' website:

"The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. 'As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world,' said Sanders. 'This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else.'"

So who were the recipients of these loans? breaks down page 131 of the full GAO audit as such:

 Citigroup: $2.5 trillion ($2,500,000,000,000)
 Morgan Stanley: $2.04 trillion ($2,040,000,000,000)
 Merrill Lynch: $1.949 trillion ($1,949,000,000,000)
 Bank of America: $1.344 trillion ($1,344,000,000,000)
 Barclays PLC (United Kingdom): $868 billion ($868,000,000,000)
 Bear Sterns: $853 billion ($853,000,000,000)
 Goldman Sachs: $814 billion ($814,000,000,000)
 Royal Bank of Scotland (UK): $541 billion ($541,000,000,000)
 JP Morgan Chase: $391 billion ($391,000,000,000)
 Deutsche Bank (Germany): $354 billion ($354,000,000,000)
 UBS (Switzerland): $287 billion ($287,000,000,000)
 Credit Suisse (Switzerland): $262 billion ($262,000,000,000)
 Lehman Brothers: $183 billion ($183,000,000,000)
 Bank of Scotland (United Kingdom): $181 billion ($181,000,000,000)
 BNP Paribas (France): $175 billion ($175,000,000,000)
 and many many more including banks in Belgium of all places

Please, spare me for the moment all talk of the debt-ceiling. At this point I could not care any less. Its morphed into a fortuitous distraction for the Federal Reserve, which apparently is being governed by people who have quite clearly lost their minds. Debt limits have failed spectacularly to restrain the issuance of government IOUs, so its vexing to see so many take them so seriously. At $14.294 trillion, the current debt ceiling its bested by the amount already lent by the Fed. Similarly, the effects of a government default on its debt obligations have been blow way out of proportion.

$16 trillion.

This is what causes recessions. Not the Community Reinvestment Act. Not Fannie Mae or Freddie Mac. Not the ratings agencies. Not credit default swaps or stock options or bundled mortgage securities any other financial derivatives. Not increased savings. Not the Chinese. Try fiat credit expansion.

Its interesting how the Fed can introduce $16 trillion into the global economy with almost full media impunity. You can count on the unfortunate passing of Ms. Winehouse to (regretfully) receive much more attention than this.

BofA mortgage pact draws glare from NY

By Andrew Longstreth 

(Reuters) - Four weeks ago, Bank of America Corp reached an $8.5 billion settlement it hailed as a step forward in putting mortgage liabilities behind it. But New York's attorney general is sending strong signals he could try to reshape the deal or even scuttle it.

The settlement, which requires court approval, could provide a template for other banks hoping to settle investor claims on residential mortgage-backed securities that went bust in the financial crisis. Bank of America agreed to resolve nearly all repurchase claims tied to mortgage bondsbacked by loans from its Countrywide Financial unit.

Almost as soon as the ink was dry on the pact, though, New York Attorney General Eric Schneiderman began to look into the deal. The investigation is part of his office's broader examination of banks' roles in the mortgage crisis.

The agreement was struck by trustees on 530 mortgage bonds with $174 billion in unpaid principal. It is backed by 22 big investors, including Pacific Investment Management Co and BlackRock Inc, which argued the bonds were stuffed with risky home loans that should not have been sold.

Some investors complain the pact is rife with conflicts and is a bad deal for them -- although a plum one for the bank. At least four investor groups have filed court papers saying they might object to the deal.

If Schneiderman also challenges the settlement, it could have to be renegotiated -- likely at a greater cost to Bank of America, analysts say. According to a court filing on Tuesday by a group of investors who oppose the deal, Schneiderman is close to deciding whether to intervene.

"The Attorney General's office has asked us to inform the court that it is completing its analysis," wrote David Grais, an attorney for an investor group known as Walnut Place LLC.

Danny Kanner, a spokesman for Schneiderman, declined to comment.

Critics of the settlement say Bank of New York Mellon Corp, which served as trustee for the mortgage pools covered by the settlement, secretly negotiated a deal on behalf of investors without their input. They argue BNY Mellon had a conflict of interest because it was indemnified by a Countrywide unit for costs and liabilities arising from its duties as trustee.


In his first seven months on the job, Schneiderman has embraced the title "Sheriff of Wall Street" that comes with the attorney general post, a position previously held by New York Governor Andrew Cuomo and Eliot Spitzer before him.

He has emerged as a key player in the negotiations between banks and state and federal regulators over alleged shoddy foreclosure practices. Schneiderman has insisted any settlement over those practices not give banks broad releases from being sued over other mortgage issues.

Under the state's Martin Act, an expansive anti-fraud statute, Schneiderman has broad subpoena power. He could use the law to gather information to evaluate the fairness of the Bank of America deal, said Isaac Gradman, an attorney who advises investors in mortgage securities.

"He certainly has a lot of power and ability to bring to the surface unappealing information about the banks," Gradman said. "That alone could give him leverage to have a seat at the table."

Still, it is unclear if Schneiderman has the power to intervene. He needs permission from a court to officially insert himself into a case. If Schneiderman does not intervene on behalf of certificate holders in the soured securities, he might argue the deal does not benefit investors at large and he should be considered an interested party as their advocate.

"There are some aspects to this deal, which the attorney general may or may not consider to be in the public interest," said Beth Kaswan, an attorney for pension fund investors seeking to intervene in the case.

In a letter to the judge on July 13, Schneiderman's office hinted at its strategy. The office opposed an order sought by BNY Mellon that would limit intervenors to certificate holders and other interested parties, wrote special deputy attorney general Maria Filipakis.

"Such an order could have a substantial adverse impact on the interests of the State of New York," Filipakis wrote.

BNY Mellon responded in a subsequent court filing that its proposed order is not intended to limit any interested party from seeking to intervene.

Bank of America and BNY Mellon declined to comment about the possibility of Schneiderman's involvement in the case. Kathy Patrick, an attorney who helped negotiate the deal for investors, did not return a call seeking comment.

The settlement requires the approval of New York State Supreme Court Justice Barbara Kapnick, who set an August 30 deadline for objections to it.

Schneiderman has sent letters asking institutional investors who agreed to the accord for the names of their clients that have ties to New York such as pension funds and charities. The letters, obtained by Reuters, have fueled speculation Schneiderman might intervene and object to the settlement.

By asking for information, Schneiderman might be trying "to nudge some activity," said Thomas Adams, an attorney at Paykin Krieg & Adams, who specializes in securitization issues.

The price tag ultimately could rise for Bank of America if Schneiderman exerts influence, said Chris Gamaitoni, a mortgage finance analyst with Compass Point Research & Trading.

Investors sue Bank of America, Countrywide

By Barry B. Burr 

CalPERS, Texas Teacher Retirement SystemBlackRock and 12 other pension funds and investment management companies are suing Bank of America and others, alleging securities fraud involving mortgage lending of B of A's Countrywide Financial business.

The suit, filed Thursday in U.S. District Court in Los Angeles, accuses the defendants of inflating Countrywide earnings by overstating the values from mortgage securitization and mortgage servicing rights.

Other defendants include Countrywide, which Bank of America acquired in 2008; Angelo Mozilio, Countrywide former chairman and CEO; David Sambol, former president and chief operating officer; Eric P. Sieracki, former executive managing director and CFO; and KPMG, Countrywide's auditing firm.

Messrs. Mozilo, Sambol, and Sieracki “blatantly issued materially false statements” between March 12, 2004, and March 7, 2008 — the time period cited in the suit — and “misled investors,” the 425-page complaint stated.

The suit accuses KPMG of issuing “false and untrue (financial) statements when it issued an unqualified or ‘clean' audit opinion,” while it “failed to obtain reasonable assurance about whether Countrywide's financial statements … were free of material misstatements arising from error or fraud.

“These prominent institutional investors made every effort to amicably resolve their claims for recovery of damages caused by the massive and pervasive fraud at Countrywide without filing formal litigation, but were unsuccessful,” Blair Nicholas, partner with the plaintiffs' law firm, Bernstein Litowitz Berger & Grossmann, said in a statement.

The plaintiffs seek recovery of their investment losses and punitive and other damages, though the suit did not quantify them. Mr. Nicholas declined to comment on the amount.

Scott Silvestri, Bank of America spokesman, couldn't be reached for comment.

Dan Ginsburg, KPMG spokesman, said, “We don't comment on pending litigation.”

Along with the California Public Employees' Retirement System, the Texas Teacher fund and BlackRock, other plaintiffs are the Maryland State Retirement and Pension System, Montana Board of InvestmentsTIAA-CREF, Norges Bank Investment Management, Royal Mail Pension Plan, PGGM Vermogensbeheer B.V., Government of Guam Retirement Fund, American Century, Nuveen, SunAmerica, T. Rowe Price and Thrivent Financial for Lutherans.


Mass AG Martha Coakley will not Join in Giving MERS and Banks a Deal

Huffington Post Article:

By Richard Zombeck 

There are some rumblings that the Department of Justice is putting the pressure on state attorneys general to sign onto the controversial $20 billion mortgage settlement deal this week that could release banks from legal claims in state investigations and law suits.

Monday, Massachusetts Attorney General Martha Coakley joined a handful of dissenters in announcing that she will oppose the inclusion of the issues surrounding MERS in any deal.

MERS (Mortgage Electronic Registration System) as pointed out by Abigail Field in a recent post on Reality Check:

... was set up thoughtlessly, without regard to its basic legality, and designed with only two objectives: lowering the mortgage industry's costs and maximizing its convenience. As a result, MERS has none of the advantages of the centuries-old system it was intend to replace, and largely has. MERS is not accurate, not transparent, and not accountable to the public. To let MERS continue simply allows it to continue wreaking havoc on property records and the legal morass it's created to continue tangling foreclosure and bankruptcy cases nationwide.

Homeowner advocates and activists have long argued that mortgages transferred via the MERS system but not recorded with local registries of deeds are invalid and that land titles on thousands of homes are "clouded". Homeowners with clouded titles could find it impossible to sell or refinance their properties without going to court to clean up problems.

Register John O'Brien, of the Southern Essex County Registry of Deeds has been pushing Coakley to investigate these issues and asked that she not agree to settle with the big banks. 


Once again I am asking Attorney General Martha Coakley and the other state Attorney's General to follow the lead of New York Attorney General Eric Schneiderman and stop any settlement talks with the banks. The results of this report are only for my registry, but I can assure you that this type of criminal fraud is rampant across the nation. This leaves me to question why anyone would consider settling with these banks until we know the full extent of the damage that they have caused to the homeowners chain of title across this country and the amount of money they have bilked the taxpayers for their failure to pay recording fees.


New York Attorney General Eric Schneiderman launched his own investigation in April. He said he was "stunned" to find the multi-state probe so lacking that no documents or witness depositions had been obtained.

"We have no leverage," Schneiderman said in an interview with the Democrat and Chronicle.

Elizabeth Warren, a senior adviser to President Barack Obama agrees. She recently told a congressional panel that government agencies may not have fully investigated claims that borrowers' homes were illegally seized by banks.

"I think there's a real question about whether there's been adequate investigation," said Warren, also the temporary custodian of the Bureau of Consumer Financial Protection at the time - a new federal agency created to protect borrowers from abusive lenders.

In addition to O'Brien's communications with Coakley, Massachusetts residents have also been active in voicing their concerns. In a letter, signed by 24 Massachusetts homeowners, Senka Huskic, a Peabody MA resident and a blogger at Home Preservation Network wrote on behalf of Massachusetts homeowners:

The results of Wall Street's fraud are numerous foreclosures, topped with the ignorance that works well for those who committed the biggest financial crime in the history of the world. Nothing will change until those responsible for this scam are prosecuted! We must do that, and we should not rest until the truth is out and the correct people are held responsible. We have had enough of being robbed blind, of paying inflated mortgages, of rescuing criminals with our tax money! We have to stand up for our kids, and Register O'Brien is there to stand up for us and with us!

Monday, we finally decided to stop being a statistic, to stop being just a number in the books of the rich and powerful. Monday, we stood up and realized that the future of our lives lies in our hands and no one else's. Our search for American Dream is becoming an all-out battle for our basic needs. The big dream is dispersing before our eyes and we're left to face the biggest financial disaster ever.

We would like to use this opportunity to ask you to join Register O'Brien, New York Attorney General Eric Schneiderman, and many others who stood up to the "too big to fail," realizing that only the American people are too big to fail. We would like to ask you to immediately cease negotiations with the perpetrators of the mortgage fraud securitization who are not able to prove that they own the houses on which they are foreclosing upon. The only way for a homeowner to prove that is to sue the bank. We all know that this means if you don't have money, very soon you won't have your house either.

You, as the state's chief legal prosecutor, must stand up for us and demand answers, demand justice. The very word NEGOTIATION describes communication between at least two sides with the intent to achieve an agreement among everyone involved. So how can we expect that the side which created, implemented, and is still proceeding with the biggest financial crime in the history of this country could have anyone's best interest in mind, other than their own?


Fortunately for us, here in Massachusetts, Martha Coakley has no problem going after banks and mortgage servicers.

Coakley slammed MERS in a Boston Herald interview on Tuesday.

"From predatory loans to 'robo-signing' to servicing fraud, the banks continue to go merrily on their way while consumers, the real estate industry and the commonwealth of Massachusetts are being cheated," Coakley said.

"The inability to get a handle on the instability in the real estate market continues to affect Massachusetts and the entire national economy," she said.

Massachusetts, once again is leading the charge and forging ahead into uncharted waters. From theSupreme Judicial Court having handed down an important decision in the Ibanez case to O'Brien relentlessly advocating for homeowners, the securitization industry's argument that the pooling and servicing agreement was sufficient grounds to transfer of the mortgages to the trust has suffered some significant blows in Massachusetts.

Taking into consideration that the Massachusetts Supreme Court is widely considered one of the best courts in the country, these are not insignificant acts.

Coakley promised to exclude the MERS issue from any deal until she fully investigates the problem's scope.

"Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct," she wrote in a letter Monday to all 21 Massachusetts county registers of deeds.

O'Brien, who spearheaded the drive against the paperwork flaws, was pleased with the announcement.

"I think this sends a message loud and clear to MERS and their shareholder banks that Massachusetts will hold them accountable," O'Brien said.

In the wake of the scandal in Florida (one of the hardest hit areas in the country), whose Attorney General, Pam Bondi, fired two investigators for actually doing their job and going after foreclosure mills, it gives me hope to live in a state where public officials take their job of protecting and defending the public seriously.

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The Banks Still Want a Waiver


HOW should banks atone for those foreclosure abuses — all the robo-signing and shoddy recordkeeping that jettisoned so many people from their homes?

It has been four months since a deal to remedy this mess was floated. Not much has happened since — at least not publicly.

Last week, banking executives and state attorneys general met in Washington to try to settle their differences. At issue was how much banks should pay, and how and to whom, to make this all go away. The initial terms, which emerged in March, were said to carry a $20 billion price tag.

But here is a crucial question: to what extent would such a settlement protect banks from future liability? Will the attorneys general strike a deal that effectively prevents them from bringing new, unrelated lawsuits against the banks?

If the releases in any settlement are broad, there will be joy in Bankville. If they are narrow, the banks will probably face more litigation, something they would rather avoid.

A looming issue relates to the potential liability stemming from the Mortgage Electronic Registry Systems, or MERS. This company, owned by the major banks, was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to expedite the home loan process.

By eliminating the need to record changes in property ownership in local land records, MERS ramped up profits for lenders. In 2007, MERS calculated that it had saved the industry $1 billion over 10 years. An estimated 60 percent of all home loans were registered to MERS.

But the MERS machine started to sputter during the foreclosure crisis. Lawyers challenged MERS’s ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. While some courts have not objected to MERS’s foreclosing in place of banks, others have.

New York courts, for instance, have been increasingly hostile to MERS. In a February 2011 opinion, Robert E. Grossman, a federal judge on in Long Island, wrote: “This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

Equally troubling for MERS is the fact that its officials have filed questionable documents with courts attesting to ownership of the notes and other significant matters.

These practices have consequences, as described by R. K. Arnold, MERS’s former president, in a 2006 deposition. “We are heavily at risk as far as, you know, having to follow the rules of the court and enforcing our rules that our members must go by,” he said. “We also have jeopardy as far as if we were to fail in the foreclosure realm.”

David Pelligrinelli, president of AFX Title, a title search company, said MERS contributed to the problem of thousands of mortgages lacking a complete ownership chain.

“You can’t go back and redocument all these things, because some of the companies aren’t around anymore,” he said. “Even if they are, the charters for these companies don’t allow for backdating of assignments.”

How MERS and its bank owners will fare with the attorneys general is unclear. The early term sheet for the possible settlement said only this: “Issues relating to the use and performance of MERS are reserved for further discussion.” Those further discussions may be taking place now. It’s a good bet that the banks want a comprehensive release from liability relating to MERS.

Officials at the nation’s top four banks declined to comment on the private talks. A spokeswoman for MERS said it was not participating in the discussions and could not speculate on them.

Lawyers who have examined this issue say it would be unprecedented to grant a broad release from liability to the banks that own MERS from claims that have not been investigated.

WHILE some states are scrutinizing MERS, most have declined to investigate its operations. That might seem surprising, given the apparent conflicts of interest in its business. Employees of law firms representing banks in foreclosures, for instance, are also officers of MERS. They can assign mortgages even though they represent a party with an interest in the outcome.

A broad release would vastly diminish the possibility of an in-depth investigation. Such a release might also make it harder for borrowers to argue that MERS has no right, or standing, to foreclose on them. The United States Trustee has supported this view in a number of recent cases, but exempting banks from future lawsuits on this issue would send a message that questioning MERS’s standing is of no interest to top state officials.

And if the banks are insulated from future state lawsuits, responsibility for any abusive acts by MERS would be pushed onto law firms that did the system’s work. With few assets, these law firms are virtually judgment-proof. The unit of MERS that held title to the mortgages also has few assets and was set up in such a way that lawsuits against it would probably reap little for plaintiffs.

MERS has begun to clean up its practices and paperwork. Officials are furiously assigning mortgages out of MERS’s name and into the banks’ names. One borrower in Pierce County, Wash., combed through records from April 1, 2011, to July 18, and found 1,956 assignments of deeds of trust executed from MERS to banks that service the loans or trustees that oversee mortgage pools.

Sure, the issues surrounding MERS seem mind-numbing. Some officials might want to wash their hands of the whole thing in a settlement. But at least one legal professional is offering to educate attorneys general — at no cost. She is April Charney, a lawyer at Jacksonville Area Legal Aid in Florida and one of the first to question MERS’s standing in foreclosures.

Internal Doc Reveals GMAC Filed False Document in Bid to Foreclose

by Paul Kiel 

 GMAC, one of the nation's largest mortgage servicers, faced a quandary last summer. It wanted to foreclose on a New York City homeowner but lacked the crucial paperwork needed to seize the property.

GMAC has a standard solution to such problems, which arise frequently in the post-bubble economy. Its employees secure permission to create and sign documents in the name of companies that made the original loans. But this case was trickier because the lender, a notorious subprime company named Ameriquest, had gone out of business in 2007.

And so GMAC, which was bailed out by taxpayers in 2008, began looking for a way to craft a document that would pass legal muster, internal records obtained by ProPublica show.

"The problem is we do not have signing authority—are there any other options?" Jeffrey Stephan, the head of GMAC's "Document Execution" team, wrote to another employee and the law firm pursuing the foreclosure action. No solutions were offered.

Three months later, GMAC had an answer. Itfiled a document with New York City authorities that said the delinquent Ameriquest loan had been assigned to it "effective of" August 2005. The documentwas dated July 7, 2010, three years after Ameriquest had ceased to exist and was signed by Stephan, who was identified as a "Limited Signing Officer" for Ameriquest Mortgage Company. Soon after, GMAC filed for foreclosure.

An examination by ProPublica suggests this transaction was not unique. A review of court records in New York identified hundreds of similar assignment documents filed in the name of Ameriquest after 2008 by GMAC and other mortgage servicers.

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The issue has attracted growing scrutiny in recent months asbloggers, consumer attorneys and media outlets have identified what appears to be part of a pattern of questionable assignments filed across the country.

GMAC, which is still majority owned by the government, was at the center of what became known as the robo-signing scandal. The uproar began last fall after revelations that mortgage servicing employees had produced flawed documents to speed foreclosures. GMAC and other banks have acknowledged filing false affidavits in which bank officials claimed "personal knowledge" of the facts underlying thousands of mortgages. But GMAC and other servicers say they've since tightened their procedures. They insist that their records were largely accurate and the affidavits amounted to errors of form, not substance.

The issues surrounding the Ameriquest loan and others like it appear to be more serious.

"This assignment of mortgage has all of the markings of GMAC finding that it lacked a needed mortgage assignment in order to foreclose and just making it up," said Thomas Cox, a Maine foreclosure defense attorney.

In New York, it's a felony to file a public record with "intent to deceive."

"It's fraud," said Linda Tirelli, a consumer bankruptcy attorney. "I want to know who's going to do a perp walk for recording this."

No criminal charges have been filed in the robo-signing cases.

Asked by ProPublica about the document, GMAC acknowledged Stephan did not have authority to sign on behalf of Ameriquest. The bank said it is still planning to push ahead with foreclosure on the homeowner, who remains in the property.

Company spokeswoman Gina Proia said an internal review last fall into "suspected documentation execution issues" had flagged the loan as problematic and that GMAC is "determining what needs to be done in order to receive the necessary authorization." 

"We will determine and complete the necessary steps to remediate and proceed with foreclosure," Proia said. 

GMAC also declined a request from ProPublica to interview Stephan.

Another GMAC document obtained by ProPublica shows that in at least one recent incident, GMAC employees were still discussing the possibility of fabricating evidence needed to facilitate a foreclosure.

The company once again lacked a document that would show it had been assigned the mortgage. Since the lender was defunct and no assignment had ever been made, GMAC again seemed to be stuck. But the employee proposed in June of this year that GMAC file a sworn statement that the assignment had once existed but had been lost. It's unclear if such an affidavit was ultimately provided to a court.

Records also show that GMAC has continued to rely on documents signed by the very employee at the center of the robo-signing scandal—Jeffrey Stephan, the same employee who also signed the Ameriquest document in 2010. Stephan acknowledged in sworn testimony last year that he had been signing 400 documents each day, a revelation that helped kick off the scandal. According to a former employee and a consumer attorney, Stephan still works at GMAC, though he has been transferred to a different unit.

GMAC said it is still pursuing foreclosures based on assignments signed by Stephan. As part of a bid to rebrand itself, GMAC renamed its holding company Ally Financial last year.  

"There is no reason or requirement to 'withdraw' valid assignments of mortgage that happened to have been signed by Mr. Stephan," said GMAC spokeswoman Proia, because there's "no requirement that [the assignment] be signed by a person with knowledge of any particular facts." All that mattered, she said, was that the signer had received the proper authority.

Banks have little reason to worry about their documents being challenged, since homeowners rarely contest foreclosure actions. In a filing with the New Jersey Supreme Court, GMAC said that of the more than 4,000 foreclosures it has handled in the state only about 4 percent of homeowners had contested the action.

When homeowners do challenge banks' documentation for foreclosures, they can have success. Late last week, the Vermont Supreme Court threw out a foreclosure case handled by GMAC due, in part, to a flawed assignment document signed by Stephan.

"It is neither irrational nor wasteful to expect the foreclosing party be actually in possession of its claimed interest," the court said, "and have the proper supporting documentation in hand when filing suit."

Since last fall, GMAC has added staff, increased training and added new procedures, said Proia. But some of those new hires have come from firms themselves accused of filing false foreclosure documents.

One manager at GMAC, Kevin Crecco, moved there from a position at the Law Offices of David Stern in Florida after the firm drew scrutiny from the state's attorney general for allegedly filing forged documents. Stern's office, once among Florida's biggest foreclosure law firms and labeled a "foreclosure mill" by critics, ceased operations earlier this year.

An internal organization chart from this spring for GMAC's foreclosure department lists Crecco as a manager overseeing roughly two dozen employees. GMAC declined to make Crecco available for an interview. He hasn't been accused of any wrongdoing.

Mortgage servicers like GMAC continue to be set up like assembly lines, with members of its "Document Execution" team responsible for signing documents. The organizational chart shows two "Document Execution" teams of 13 employees each.

The employees are tasked with, among other things, signing affidavits attesting to the accuracy of the basic facts of the loan, such as the mortgage amount, outstanding fees, etc. Affidavits are a necessary step to foreclosure in many states where banks have to go to court to seize a home.

During the robo-signing scandal, GMAC admitted that employees signing affidavits didn't verify the underlying facts. The bank says it has fixed the problems.

But consumer attorneys said that while GMAC's processes have improved, they haven't corrected basic flaws with their process.

Cox, the attorney who questioned Stephan last year as part of a foreclosure case, said employees on the "Document Execution" team still aren't truly checking the accuracy of the underlying information. Rather than digging for the original documents, employees on the team look at the numbers given by a GMAC database and double-check the math.

If the employee "just looks at a computer screen, that's not sufficient in my view," said Cox. He said he would soon be challenging affidavits GMAC recently filed in court.

Consumer attorneys also said the systems that servicers rely on are consistently plagued with inaccuracies, making a more thorough verification of the information necessary. "These days, homeowners are being forced to save every receipt, every letter, every statement, so that one day they can prove that their payment history is accurate and the bank is wrong," said Jim Kowalski, a consumer attorney in Florida.

In face of criticism, mortgage registry exits

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Countrywide Pays $108 Million to Settle Mortgage Fraud Claims

Lost in the news of the manufactured debt-ceiling crisis and the very real tragedy in Oslo was news of another foreclosure fraud settlement.  Countrywide Home Loans agreed to pay $108 million to settle claims that they charged excessive fees to more than 450,000 borrowers.  The settlement is the biggest in the history of the Federal Trade Commission and wound up being about double what the commission had originally estimated.

The scope of the fleecing is pretty amazing.  Those 450,000 borrowers represented more than 1 percent of all mortgages in the United States.  The entire business model was “based on deceit and corruption” according to Jon Leibowits, chairman of the trade commission.

Countrywide set up subsidiary companies to conduct property inspections, title searches and maintenance on homes going through foreclosure.  These subsidiaries were then “hired” by Countrywide to perform those services, at a cost markup of more than 100%.  For example, some troubled borrowers were charged as much as $300 by Countrywide to mow their lawns.  The strategy was simply to increase profits from default-related services during bad economic times.

The excessive fees and improper charges were levied on borrowers whose loans were serviced by Countrywide.  Most of the borrowers receiving money under the settlement were routinely charged excessive amounts by Countrywide for default-related services.

But that’s not all.  Over 100,000 former Countrywide customers will share in the settlement because Countrywide gave them incorrect accountings about what was owed on their mortgages and added fees and escrow charges without notice.

While former customers may not see that much money from the settlement — most payments will be $500 or less, with 5% receiving $5,000 or more, the larger narrative is what we should focus on.  Our banking industry, when given the opportunity, did not blink at leveraging a troubled economy and profiting off those most vulnerable so much so that they were willing to commit outright fraud to do so.

In Cleveland, Brown Joins Homeowner Advocates to Call for Crackdown on Fraudulent Foreclosures

Call for Action Follows New Reports of Banks and Mortgage Processors Continuing to Forge Signatures and Submit False Affidavits

Brown Has Authored Legislation to Keep Ohioans in their Homes and Stem Foreclosure Crisis; Sent Letter to Federal Regulators Urging Them to Better Protect Consumers and Prevent Further Illegal Practices

CLEVELAND, OH - July 26, 2011 - (RealEstateRama) — In the wake of reports that banks and mortgage processorshave continued a practice known as “robo-signing”—forging signatures and submitting false affidavits—U.S. Sen. Sherrod Brown (D-OH) held a news conference in Cleveland today to call for renewed federal efforts to crackdown on this risky, illegal practice that undermines Ohio’s housing market. This unlawful act has forced thousands of homeowners into foreclosure and raised doubts about the ownership of hundreds of thousands of mortgages. Recently, both the Associated Press and Reuters reported that despite regulators’ assurances to the contrary, illegal robo-signing allegedly remains rampant in both foreclosure and non-foreclosure cases.  The reports also suggest that some regulators are aware of these violations.

“Earlier this year, Wall Street assured us that “robo-signing” —a fraudulent and illegal practice that damages Ohio’s housing market—was a problem of the past. But recent reports have made clear that the foreclosure mill is alive and well,” Brown said. “A complete economic recovery requires a recovery of our housing market, too—and “robo-signing” makes that goal impossible. We should be helping families stay in their homes, not gouging homeowners and forcing more houses onto an already depressed housing market. That’s why I have fought for increased oversight from federal regulators, meaningful penalties for services that break the law, and strong, pro-consumer legislation that protects homeowners, not bank executives.”

Brown was joined by Neighborhood Housing Services of Greater Cleveland Executive Director Lou Tisler and Ward 12 Councilman Anthony Brancatelli, both of whom discussed the practice of “robo-signing” and its harmful effects on not just homeowners, but also Ohio’s housing market and economy as a whole. According to RealtyTrac, in Cuyahoga County, approximately 9,335 homes are in foreclosure as of June 2011—the highest rate of any county in Ohio. Brown was also joined by Richard Nicholson, a Cleveland resident who was a victim of robo-signing.

“Cutting corners in the foreclosure process is not a privilege given to homeowners—why should it be acceptable for servicers?” Tisler said. “Fraud on any side of the equation should not be tolerated.”

“We must end the illegal act of fraudulent robo-signing which escalates wrongful foreclosures.  We are on a path of recovery in Slavic Village and welcome the Senator’s support on this issue,” Councilman Brancatelli said.

Following the news last week of continued abuses by mortgage servicers, Brown today outlined landmark legislation he authored to prevent future servicer fraud and errors, improve foreclosure counseling and prevention, and reform oversight of mortgage-based investing. The Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 would expand access to foreclosure prevention services, while increasing protections for homeowners and investors in mortgage-backed securities. Specifically, the Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 would:

  • Protect homeowners from servicer errors, miscommunications, and abusive fees
  • End the rush to foreclosure and require servicers to work with homeowners to find sustainable mortgages
  • Improve standards for staffing and casework by mortgage servicers
  • Protect the interests of investors who buy securities backed by residential mortgages
  • Reform oversight of pools of securitized mortgages

The Foreclosure Fraud and Homeowner Abuse Prevention Act of 2011 is endorsed by the Alliance for a Just Society, Center for Responsible Lending, Community Organizations in Action, National Association of Consumer Advocates (NACA), National Consumer Law Center (on behalf of its low-income clients), Coalition on Homelessness & Housing in Ohio (COHHIO), Neighborhood Housing Services of Greater Cleveland, and the Columbus Housing Partnership (CHP). Click here for additional information on the bill.

At today’s news conference, Brown also urged federal regulators to better protect consumers by publicly releasing information related to the mortgage servicer settlements. Brown requested increased transparency of independent audits because consultants, chosen by the mortgage servicers to perform foreclosure reviews, have other business relationships—and therefore conflicts of interest—with those same mortgage servicers. Brown also requested the public release of Engagement Letters, Action Plans, Foreclosure Reviews, and other plans, policies, or processes submitted to regulators by mortgage servicers or third-party servicers to ensure that abuses in foreclosure practices are not being ignored by the review process.

Brown, chair of the Financial Institutions and Consumer Protection Subcommittee, is a leading proponent of providing assistance to communities affected by the housing crisis and population loss, and has led the fight against wrongful foreclosures and unfair practices by Wall Street. He encouraged federal regulators to freeze foreclosures after the discovery last year that many servicers were wrongfully foreclosing on homeowners and not following existing foreclosure procedures and laws. In July 2010, he sent a letter to the executives of the nation’s four largest banks calling on them to work with responsible homeowners to avoid foreclosure. Brown also fought for the creation of the Neighborhood Stabilization Program (NSP) in the Housing and Economic Recovery Act of 2008 and the continuation of the program in the American Recovery and Reinvestment Act (ARRA) of 2009.

Press Contacts:

Martha Coakley Letter Re Massachusetts Register of Deeds Association Request for Meeting

July 25, 2011

William P. O’Donnell
Register of Deeds
Norfolk Registry District of the Land Court
649 High Street
Dedham, MA 02026

Re: Massachusetts Register of Deeds Association Request for Meeting

Dear Register O’Donnell,

Thank you for your letter of July 8, 2011. We look forward to meeting with you and your fellow Registers on August 11th, to discuss your concerns regarding MERS, the filing of false or
misleading documents with registries, and other matters.

As you are aware, we are currently investigating creditor misconduct in connection with
unlawful foreclosures, including failure to establish the right to start a foreclosure as well as
filing false or misleading documents with registries in the Commonwealth. We have focused
particularly on creditors’ reliance on MERS and whether MERS conforms to the requirements of Massachusetts law, in the context of foreclosures and otherwise. In the next week, we plan to
send civil investigative demands (CID) to Registers in order to gather critical information to our investigation, and appreciate your continuing cooperation in this process. If the Massachusetts Registers of Deeds Associations or any individual Registers have questions or concerns about the CIDs, they should contact Public Protection and Advocacy Deputy Bureau Chief Stephanie Kahn at 617-963-2986.

Many of your fellow Registers also have asked about the impact of our investigation on the
ongoing federal-state negotiations with the large banks. We have made clear that Massachusetts will not sign on to any global agreement with the banks if it includes a comprehensive liability release regarding securitization and the MERS conduct. We strongly believe that these investigations must continue and responsible parties must be held accountable in order to fully protect homeowners and return to a healthy economy.

We look forward to continuing to work with you on these important matters.


Martha Coakley

cc: John F. Meade, Barnstable Register
Andrea F. Nuciforo, Jr., Berkshire Middle Register
Frances T. Brooks, Berkshire Northern Register
Wanda M. Beckwith, Berkshire Southern Register
Barry J. Amaral, Bristol Northern Register
J. Mark Treadup, Bristol Southern Register
Bernard J. McDonald, III, Bristol Fall River Register
Dianna E. Powers, Dukes Register
Robert F. Kelley, Northern Essex Register
John L. O’Brien, Jr., Southern Essex Register
Joseph A. Gochinski, Franklin Register
Donald E. Ashe, Hampden Register
Marianne L. Donohue, Hampshire Register
Richard P. Howe, Jr., Northern Middlesex Register
Eugene C. Brune, Southern Middlesex Register
Jennifer H. Ferreira, Nantucket Register
Jolm R. Bucldey, Jr., Plymouth Register
Francis Roache, Suffolk Register
Kathleen Reynolds Daigneault, Northern Worcester Register
Anthony J. Vigliotti, Southern Worcester Register