Nationstar on other Non-bank mortgage servicers/investors of non performing mortgage backed securities seem to be once again gaming the system with affiliated mandatory online auction schemes, with Auction.com.

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Nationstar’s mandated Market Validation Program is a program where it requires distressed homeowners to submit their home for sale on an online public auction with a company, Auction.com.  This is required of homeowners, even when they already are in contract to sell the home with a contract vended purchaser by short sale application to the servicer.  A refusal to participate in this program causes Nationstar to close consideration of the proposed short sale application and thus any chance for HAFA like relief from the substantial deficiency which results if a foreclosure is consummated on the property. 

This forced online auction scheme compels distressed homeowners, as contract vendors, to breach the existing contract of sale which was submitted to the servicer for consideration of the short sale.  Under this scheme bidders on the online auction can be the very investors, assignees or note holders of the subject non performing mortgage backed asset.  The bidders can also be the auctioneer Auction.com itself or Nationstar, or one of their affiliates or investors.  Permitting such non-disclosed investors, shareholders and other affiliates, to bid via the blind online auction appears to avail upon them improper transactional control over the distressed homeowner and property; including creating an artificial bubble like elevation of the offered sales price and interference with the existing contract by affiliates or employees of the investor note holder, whom may not have to actually put all the money allegedly bid on the table to secure the transaction, if certain swaps and the like are available.  Who knows?

The distressed homeowner will never know because they are forced to sign an agreement with Auction.com which permits such type of inside dealings.  Auction.com can mislead distressed homeowners and contract vendees in the process.  Contract purchasers are forced to become bidders in the online auction to preserve their interest in the property.  The sale price, set by the contract can then become the leaping off point for investors who want to get the property.  This subjects any purchaser to a scenario where on any offer they make for a property which goes into contract, they will be required to bid against their accepted negotiated offer under the scheme. 

Auction.com also fails to disclose the reserve prices at auction required to close deals and by secretly bidding on behalf of sellers to drive up prices. Bidders on Auction.com don’t know who they are bidding against, including Auction.com and Nationstar, their affiliates and investors; nor do they know whether any alleged objective reserve price is even set, or instead if the reserved price is a moving bar, known only to the insiders, set by potentially self-dealing entities.

Contrary to Nationstar’s claims, this auction process should not be considered comparable to just any other auction process.  Auction.com and Nationstar are not selling widgets at auction. These are non-performing mortgages on loans which are regulated by the Federal and State government, which attempt to provide some measure of protections for distressed borrowers.  Meager protections established as impotent concessions by Wall Street for the government, while it doled out all that TARP money and corporate welfare to banks which caused the collapse of our economy and continued to give their executives huge bonuses and golden parachutes.(Guess which sector of the business world has been recording record profits since then.)  

This level of control, apparent self-dealing and secrecy leaves a bad taste in the mouths of homeowners who already got that short end of the stick during the sub-prime debacle.   

This auction.com process does not seem to me to be “democratizing the process,” but instead the very opposite.   Big institutional investors do not need any more inside advantages above what they already have; Especially not at the expense of the distressed homeowner.  Come on folks leave some meat on the bone.

My primary objection to this scheme is it jeopardizes distressed homeowner’s opportunity for HAFA  like relief, (now that the government’s relief program has been allowed by the Congress to expire as of December 31, 2013) and exposes the distressed homeowner to substantial deficiency judgment on the distressed property should the process cause the existing proposed transaction to be delayed or to fail.  Such interference and frustration of the short sale contract process appears more strategic than accidental, permitting improper causative elevation of the short sale’s price.  Any elevation in the bid and sale prices of distressed properties should not be driven by blind bids from non-disclosed interested parties, for market control on the bidding process and insider self dealing. Transparency is necessary.

Moreover any affiliation and coordination between Nationstar, Auction.com and their mutual substantial investors, etc., presents as an unacceptable organized enterprise which contravenes the borrower’s rights; and violates various Federal and State regulations; forcing borrower from a loan workout by short sale. Such affiliations and economic machinations, if present, would not only violate the free market processes, and fair business practices, but also State and Federal Law.

This past March, 2014, Benjamin M. Lawsky, of the Department of Financial Services, New York State’s top banking regulator demanded details about the company’s staffing levels, modification procedures and affiliated businesses.

In a letter to Nationstar, Lawsky, superintendent of financial services, said his office had received “hundreds of complaints from New York consumers” about problems related to the company’s mortgage modifications, improper fees and lost paperwork.

“Our department has significant concerns that the explosive growth at Nationstar and other nonbank mortgage servicers may create capacity issues that put homeowners at risk,” Mr. Lawsky said in the letter.

Nationstar, a Delaware company, based in Texas, is one of  the largest nonbank servicing companies.   Mr. Lawsky will hopefully receive details about the company’s affiliated businesses, which pose multiple conflicts of interest and could put homeowners at greater risk of foreclosure.

Mr. Lawsky is asking Nationstar for a list of its third-party vendors, including its affiliates, and the procedures that the company takes to prevent potential conflicts. Nationstar’s chief executive, Jay Bray, said, “We intend to comply fully and transparently with Mr. Lawsky’s request.” And   “We have a proven track record of helping homeowners succeed and avoid foreclosure, and we welcome the opportunity to share this information with the New York Department of Financial Services.”

This does not jive with my representation of hundreds of distressed homeowners over the last 7 years.  What I have seen is the recent transfer of many many files from Bank of America and other servicers to Nationstar, coupled with the prompt denial of pending modification applications which were being considered by the transferring servicer B of A.  

It appears as though the scheme of Nationstar and others like it are designed to exert improper control over the distressed properties in their portfolios and inventory; that a new industry of big business with designs at procuring distressed properties and converting them to rentals has take root.  Insiders can out bid a bona fide purchaser who wants to rehabilitate the property, live in and/or make a profit selling the property, because of their positions they will make substantial profit on the investment in the end.

Making a killing is always a great thing in this capitalist land of the free and home of the brave, where Contract and Profit are kings.  But let’s not permit the defiling of our queens, Equity and Fairness, in blind worship and pursuit of the kings.  Please do not tell the distressed homeowner to go eat cake.

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Rancho Cordova Couple Turns Tables On Lender’s Foreclosure Attempt

According to the Appellate Division 2d Department, in New York, the defense of the bank’s lack of legal standing to bring the action, can not be utilized to defend against an improper foreclosure, even when the Plaintiff foreclosing bank can not prove it legally holds the note and mortgage, if a distress homeowner defendant does not raise the affirmative defense of lack of standing in a timely filed and served answer. This holding permits some “investor” banks to utilize legal process to effect a foreclosure upon homeowners by utilization of misrepresentation and fraud upon the courts, as long as the distressed homeowner is not able to file an answer.

Conversely, these “investor” banks have been able to have lower courts prevent distressed homeowners from challenging the plaintiff trust banks’ alleged standing, where it is clear the plaintiff trustee purportedly took assignment of the note and mortgage after the pooling trust had already been legally closed. Some lower courts have held that a distressed homeowner does not have standing to challenge the violation of the trust, on standing grounds. So under such reasoning the bank argues, it doesn’t concern the distressed homeowner that the plaintiff entity is a legal fiction or the assignment of the note to it is void because a closed trust can not accept such assignment. How can a defendant in foreclosure not have the right, at any point in a foreclosure action to challenge the fact that the plaintiff in the action is a legal fiction, designed to trick the distressed homeowner, the IRS, the courts and society at large. it makes no sense.

How low will our legislature and judicial branch be subjected to the muck of fraud and misrepresentation in furtherance of some political sensitivity to an apparent contract is king voting base in their communities. Perhaps it would be better to educate the tax paying citizens as to why standing up to corporate fraud benefits our society. How historically, advances in our democracy and capitalism have always been associated with checks and balances on corporate greed and manipulation and injury of the many for benefit of the very few.

The courts must continue to strive to be our bastion of equity; where the light of truth, fairness and equity casts out the shadow dockets and murky actions which don’t even pass the proverbial laugh test. Certainly contract will continue to be king in this great Country. It probably should do so. But let us not forget, what allows it to reign above all other forms of government is its Queen, Equity. Let us protect our Queen, especially when she is being assaulted by those who will run buck wild if they could get away with it.

But I am excited about a case coming from Wells Fargo Bank, N.A. v. Erobobo, et al., 2013 WL 1831799 (N.Y. Sup. Ct. April 29, 2013). In Erobobo, defendants argued that plaintiff (a REMIC trust) was not the owner of the note because plaintiff obtained the note and mortgage after the trust had closed in violation of the terms of the PSA governing the trust, rendering plaintiff’s acquisition of the note void. Id. at *2. The Erobobo court held that under § 7-2.4, any conveyance in contravention of the PSA is void; this meant that acceptance of the note and mortgage by the trustee after the date the trust closed rendered the transfer
void. Id. at 8.”

Based on the Erobobo decision an assignment of a Note after the start up or closing of a trust is void ab initio. Somethng that should be so simple and clear has taken the brilliance of the very Honorable Supreme Court Justice (Kings County) Wayne Saitta. When someone speaks the truth, it is hard for any to refute. “Plaintiff’s ownership of the note is not an issue of standing but an element of its cause of action which it must plead and prove.” Thank you Judge for having the fortitude to speak truth at a time when it is really needed in our democracy.

CBS13 | CBS Sacramento

RANCHO CORDOVA (CBS13) — A Rancho Cordova couple is staying in their home after it was nearly sold out from underneath them by their bank.

Cheryl Alimena and her husband Charles say their home was full of life and celebrations.

“We planned on being here for the rest of our lives,” he said.

It was also filled with grief after their son died in a car accident just two years ago.

“This house, it has a lot of memories for us, and it meant a lot to us before, but it means a lot more now,” Cheryl said.

The family nearly lost that home, but they won it back from a pending foreclosure after suing their lender.

“It was like a bad dream,” Charles said.

They’re one of a growing group of foreclosed California owners taking their lenders to court following the foreclosure crisis.

Loans from the housing bubble were…

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If Contract is King then the Court must insure that Equity is its Queen.

In the many foreclosure actions I have defended for distressed homeowners over these past years since the advent of the sub-prime mortgage industry meltdown, much focus and deference  has been placed on the principles of contract and upon the fact the note and mortgage reflect contracts and the payment of funds to the borrower for the purchase of real property.  Despite any arguments I make evidencing fraud, fraudulent inducement, misrepresentation, violations of RESPA, HUD and other Federal and State Regulations, debilitating and gouging closing fees charged by originating lenders and their Wall Street wharehouse lenders, the plaintiff banks and many judges, always retort and end with “well… your client got the money didn’t he/she?”

Yes, in many cases my client was able to purchase a home he couldn’t afford, with what little capital he had at the time, to enter into a loan agreement and product designed by the banks to fail. Years before the meltdown and recession it caused, the Wall Street king pins, had created their latest financial product, the mortgage backed security, where they were able to convert the traditional mortgage into unregulated bonds/stocks, which could be sold across the world to the naive investors looking to cash in on the newest bubble Wall Street was peddling.  The big banks didn’t have a problems selling these securities because they promised to provide big investors with preferences and insurance on their investment by AIG, an insurance company we discovered was too big to fail.  An insurance company which would have pulled down the big boys on Wall Street, if the government didn’t step in to help AIG.

Meanwhile Goldman and other really smart players, knowing what was coming, had pulled out of the marketplace long before the expected mess hit the fan on the street and across the global markets.  Not only did they head for the hills, but apparently, they continued to let their clients buy, buy, buy, while they and their best customers, bet in the market that the product would fail.  They made a killing on the crash.  When the government was handing out TARP funds, these very smart and swift firms didn’t even want to take the TARP funds, because they didnt need it and because it came with some strings attached; however the government in its wisdom compelled them to take it.  How would it look if these firms which basically caused the meltdown of our economy flagrantly danced around with their record profits, while all those who drank the cool aid were falling down and occupying Wall Street.

This was product based in fraud, designed by its creators to fail, sold and bankrupting pension funds, municipal retirement funds, municipalities and Countries.  Securitized pools of loans, sold like stocks, placed into the stream of commerce, by their generals, captains and field marshals, by foot soldiers.  Who is in jail now?  Not the king pins, not the generals. But instead, the foot soldiers that did their bidding. The borrowers who drank the cool aid.  The mortgage brokers who were on the street selling the stuff.  The realty appraisers, who were fired if they didn’t bring the “right” value in on their appraisals.  Should we have these people on the street prosecuted for their crimes? Yes.  Should the king pins have been able to retire with millions of dollars in retirement packages and the like, while thousands lost jobs and all their retirement savings.  Guess how many Wall Street Mortgage King Pins and their generals have been prosecuted. “0”

So yes, the answer is yes, my client did sign a contract, a note, a mortgage.  He did get the money which made him think he was buying a home or refinancing to make repairs to his roof, or to pay for collage for his family.  But what did he get?  A mortgage with an artificially low interest rate designed to hook him in, which would double when the adjustable rate period kicked in two years later.   Then a foreclosure action, a judgment of foreclosure, eviction papers served on his teenage daughter.  Homelessness, ruined credit, and the impossibility of other home owning options, and bankruptcy.

What did the bank get.  More money than we can say.  How?  Well the big banks sold the loans before they defaulted.  For the banks that still held the loans after the crash, those banks dumped the non performing assets to “investors”  who bought the notes for 10 cents on the dollar.  Then the big banks declared the losses, and were able to take these non performing assets off their books, so they could be profitable again.  The government handed out money to them, I guess as a punishment for their involvement in the scheme.  Only a few years after the crash, the big banks were posting record profits and higher then expected returns.

You will never guess who bough the paper for ten cents on the dollar?  Did you ever wonder what happened to many of  the Ivy League executives and principals from California that created sub prime lenders like New Century, Fremont Investment and Loan, etc., and other sub prime firms which raked in more money than you can even count.  They didn’t just go away you know.  They formed new companies they called “servicers.”  They could take these horrible non performing assets off the Big Banks’ hands for 10% of the paper’s face value.  Which really was a doing the big banks a favor, because believe them, they knew how defective and messy those loans were.  In a former life, they worked for the very firms that originated the toxic loans for the big banks.

I kid you not,  this information is available all over the net, you just have to know where to look.

Next these “servicers” (which really own the paper and are now in position of the bank) try as best they can to wrestle the property away from the distressed homeowner, rehab it and sell it for an incredible profit.  Or if they can get the homeowner to split for a $3,000.00 moving fee (what they call “cash for keys”) then they foreclose and make the big money.

My clients in foreclosure used to say to me, “if they dont give me a modification…the bank is going to lose; the property is not worth as much as the loan, and underwater.”  the bank is going to lose?”  I kept thinking about this statement.  Corporations are not in the business of losing.  If they lose, they go under.  But after a long time, what was really happening became apparent.  Lets say the note has a principle of $500,000.00 owed on it at the time of foreclosure.  This incoming investor paid $50,000.00 for it.  At foreclosure sale or short-sale  the property fetches $300,000.00.  Guess who just made over a 200% profit on their investment, buying non performing asset, which in a prior life, they originated in sub prime?

Yes my client got the money.  But its not that simple.  Principles of contract have always been king in our beautify and and yet sometimes horrific capitalist society.  It part of what makes this country great.  But if contract is king, i maintain the greatness of this Country stems from the fact that Equity and the Law are supposed to be its Queen.  A foreclosure action is an action based in Equity.  This means that any party coming to the Court for relief must have “clean hands”.

Our society must not allow homage to contract to trump the law and soil the integrity of our Courts. Courts which unknowingly deferred to banks and overlooked or ignored the fraud being perpetrated by the banks in the Courts against homeowners in the foreclosure actions being advanced all over the Country.  Our Courts must have a say when legislators refuse to take action to protect the fundamental principles of equity due process and fairness, which are codified in our laws?  The banks and their investors have pulled the wool over all of our eyes, but It is not going to happen forever.  In recent years judges, legislators and lawyers have caught on to the scheme and called it out.  Not in time for most of those who lost their homes already.  But in time to stop the remaining batch of actions which are a blight on our Court system and society.

The checks and balances in our democracy and the method of confronting inequity in society are painstaking and take so much time.  Our regulators and government officials are constantly playing catch up with those innovators who find loop holes and scheme to earn profits with complete disregard to the welfare of our Nation and its people.  In the mortgage foreclosure world, things have only moderately improved with respect to the protections enacted to prevent the abuses that led to the meltdown the misfortune of so many.  The laws created to protect distressed homeowners have no teeth and have been flouted by banks, who just keep paying fines and settlements to avoid criminal prosecution.  Pay a few billion dollars, it is just a couple of days pay.

Wall Street funds the reelection campaigns of the legislators in Washington and New York.  The legislators write the laws which are suppose to protect the borrowers who were taken advantage of.  They write laws to satiate the masses.  Laws with no teeth, which the banks can dance around, as long as they pretend to be dealing in good faith to offer home retention options to the distressed borrower.

A cram down statute proposed by some progressive minded legislators was rejected by government.  Such a statute would have permitted trustees in bankruptcy to restructure and reduce the debt on a home to comport with the current value of the property for interest rates which were more reasonably related to current market forces.  But such idea was squashed.  Instead the benefit of the restructuring or reducing the mortgage debt was given to the market.  Why should it be given to the working and middle class?  Instead give it to the folks that originated the loans, who buy the paper for a song, and then putthe property in to their inventory, and just wait a few years to gain control of the home, resulting in a absurd profit on their investment.

i guess when they make a killing on a foreclosed home in the latest scheme, the wealth will trickle down to the rest of us.

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