Editor’s Note: The reason they “lost” the note is that it was a strategic decision to claim they lost it. There is a procedure for re-establishing a lost note and until recently the rules were extremely loose — because back in the days when those rules were established you had two parties (the borrower and the bank) instead of hundreds of parties in securitized mortgage backed securities. There is no good procedure for those who wish to make a claim on the note, the mortgage or the underlying obligation and most likely there never will be such a procedure. First and foremost this is because (a) none of the parties initiating foreclosure have lost any money nor are they at risk (thus they have no place “at the table”) and (b) the parties who did lose money are not stepping forward — because to do so would be to accept the role of a holder in due course, which means that all claims for predatory loans, fraud, usury, TILA violations would fall on the investor. Better to write it off completely than expose themselves to treble damages and a dubious paper trail lacking proper recordation of instruments.So they are the empty chair “at the table.”

Which brings us to modification: there is no modification unless ALL the parties to the contract are present and agree with the same formalities as the original instrument. That means the investors, who are the ONLY class of people with a potential claim (unless they were paid by insurance, counterparty, or federal bailout), MUST be present since they are the only decision makers with an arguable position to modify anything. The Obama administration is dead wrong in thinking that these loans can be modified by servicers without further clouding the hopelessly obscured title of EVERYONE who has taken a certificate of title or deed to property that was financed masquerading as a securitized mortgage loan.

Currently modifiers are servicers or other administrative intermediaries. Lawsuits have already been filed against the servicers by investors for modifying contracts upon which the investor relied in putting up the money. Even the investors agree these intermediaries have no right to do so. Of course for every servicer, you have a loan originator, even if they did not originate the particular loan you are dealing with. The game was to originate loans and swap servicing rights in a shell game liked to passing a whiskey bottle around at a frat party (Mike Stuckey, MSNBC.com). The goal was to confuse the borrowers into thinking they knew who their “new lender” was when the “new Lender” was the original source of funding (the investor) and never was either the originating lender (payee on the note) nor the servicer or successor servicer.

This goal was achieved and then some — government, courts, lawyers and even borrowers were so confused by this myriad of transactions and parties, that they naturally sought the simplest form of relief, directed their correspondence to the wrong “lender” (pretender lender) and now these boneless intermediaries are receiving aid from the Federal government to modify mortgage — contracts to which they are not parties relating to notes they don’t own (and which were paid in full, sometimes several times over), supposedly secured by mortgages or beneficial interests in real property in which, except for the last minute in the process of foreclosure, they do not appear on record (thus depriving the borrower of knowledge as to who claims to the “lender”).

The result, as we have repeatedly described and predicted in these pages, was inevitable……..and kudos to NY Times for getting this right. If you want to test this out, try offering to pay off the mortgage and ask for who is going to accept the money, what are they going to do with it and what evidence they will produce to show they have the authority to execute a satisfaction of mortgage or release and reconveyance. They can’t and they won’t.

Promised Help Is Elusive for Some Homeowners

MESA, Ariz. — She had seen the advertisements for the new government program offering relief. She had heard President Obama promise that help was on the way for homeowners like her, people who had lost jobs and could no longer make their mortgage payments.

But when Eileen Ulery called her mortgage company — Countrywide, now part of Bank of America — the bank did not offer to alter her mortgage. Rather, the bank tried to sell her a new loan with a slightly lower monthly payment while asking her to pay $13,000 toward the principal and a fresh $5,000 in fees.

Her problem was that she did not yet present a big enough problem to merit aid.

Yes, she was teetering toward delinquency. She was among millions of homeowners rapidly sliding toward danger for whom the Obama administration had devised an aid program — some already in foreclosure proceedings, others headed that way as they ran out of means to make their payments. But unlike those in imminent peril of losing their homes, Ms. Ulery had never missed a payment.

“I don’t know who this bailout is helping,” she said. “We’ve given these banks all this money and they’re not doing what they say they’re doing. Something’s not working right. They keep saying they’re doing all this, but we don’t see it down here at this level.”

More than three months after the Obama administration outlined a new program aimed at rescuing millions of distressed homeowners by compensating banks that modify mortgages, Ms. Ulery’s experience illustrates the mixture of confusion, frustration and limited assistance that now reigns.

Through many months of wrangling over the fate of the financial system, with hundreds of billions of taxpayer dollars dispensed on bailouts, distressed homeowners have waited for their own rescue amid talk that it was finally on the way. Modifications of so-called subprime and Alt-A mortgages — those made to people with tarnished credit — actually fell by 11 percent in May from April, according to research by Alan M. White at Valparaiso University School of Law.

A Treasury spokeswoman, Jenni Engebretsen, confirmed that homeowners like Ms. Ulery — current on their mortgages yet grappling with a hardship like unemployment — were eligible for loan modifications under the program. She said mortgage servicers had offered to modify more than 100,000 loans since the department announced the program.

But how many loans have been modified? Ms. Engebretsen declined to say, noting that the Treasury was working with mortgage companies to “fine-tune reporting systems.”

A spokesman for Bank of America Home Loans, Rick Simon, confirmed that the bank offered Ms. Ulery refinancing and not loan modification. The bank is now focusing on modifications only for those borrowers “who are already in severe threat of foreclosure,” he said.

“We’re still putting the systems in place to handle people who are current on their loans,” Mr. Simon said, declining to say how many loans Bank of America had modified. “It’s still very, very early in the program.”

Ms. Ulery, 63, is the face of the latest wave of troubled American homeowners, a surge of people in financial danger not because of reckless gambling on real estate, but because of lost income.

Far from being one of those who used easy-money loans to speculate on homes proliferating across the desert soil of greater Phoenix, she has lived in the same modest, stucco-sided condo in suburban Mesa for a dozen years. She bought the two-bedroom home in 1997 for $77,500.

For two decades, she worked as an executive assistant at nearby Arizona State University, bringing home more than $1,000 every other week — enough to pay the bills.

Round-faced, wry and given to staccato bursts of laughter, Ms. Ulery regularly visits yard sales, seeking out plates and patchwork quilts for her collections. She takes pleasure in her two grandchildren and her beagle. She enjoys an occasional glass of wine, favoring a $6 merlot that comes in a screw-top bottle.

“I’m not an extravagant-type person,” she said. “I see these big houses all around, and they’re beautiful, but I’m comfortable in my little condo.”

Like tens of millions of other American homeowners, she added to her mortgage balance as the value of her condo swelled, at one point exceeding $200,000. She refinanced to pay off some credit cards and settle into a 30-year, fixed-rate loan. Later, she took out a home equity line of credit to buy a new Hyundai. She refinanced again in 2007, borrowing $20,000, mostly for a new roof.

Over the years, her monthly payment swelled from about $600 to more than $1,000. With planning and self-control — she tracks her monthly expenses on a color-coded spreadsheet — she always came up with the money. “I’ve never been late,” she said.

But the equation broke down last year, when she lost her job in university budget cuts. Ms. Ulery received six months of severance. She arranged a monthly $1,500 Social Security check. But when the severance ran out in October, her mortgage finally exceeded her limited means.

With so many people out of work, and with her doctor counseling rest for a stress-related illness, she did not pursue another paycheck, negotiating to have her university pension begin earlier. She has been leaning on credit cards.

Across the country, millions of homeowners in similar straits have been sliding into delinquency. Some owe more than their houses are worth.

Ms. Ulery is among that unhappy cohort — her house is worth about $122,000, and she owes $143,000 — but walking away is not for her.

“In my family, we don’t do that,” she said. “You pay your bills. And I wanted my home.”

In March, she heard about the Obama administration program. The Countrywide Web site directed her to a government site, makinghomeaffordable.gov, she said. There, she took a test to determine her eligibility for a loan modification.

Was her home her primary residence? Check. Was she having trouble paying her mortgage? Check again, and so on until the screen told her that she might qualify.

In April, she called the bank. The representative said the bank was not doing modifications for people like her, she recalled. He shifted the conversation: if she handed over $18,000, he could lower her payment to $967 from $1,046. Her interest rate would actually increase slightly, with the drop largely because she was putting down more money.

“I just laughed,” Ms. Ulery said. “It was a really good deal for them.”

To which she poses her own question: What sort of deal is it for the American taxpayer? As she sees it, the same banks that generated the mortgage crisis are now getting public money to fix it, while doing little more than seeking new fees.

“I don’t think the government gets it,” she said. “These are the same people you couldn’t trust before.”

Tags: borrower, countrywide, disclosure, foreclosure defense, foreclosure offense, fraud, Lender Liability, lost note, mortgage meltdown, predatory lending, securitization, TILA audit
Posted in Corruption, Eviction, Modification, securities fraud, Servicer |