Some homeowners say the banks tried to foreclose on a house that did not even have a mortgage. Others say they believed they were negotiating with the bank in good faith. Still others say that even though they are delinquent on their mortgage payments, they deserve the right to due process before being evicted.

Some consumer lawyers say they are now swamped with homeowners saying they have been wronged by slipshod bank practices and want to fight to keep their homes. Joseph deMello, a Massachusetts lawyer who represents Mr. Rought, said the common denominator in many of the cases was an overwhelmed system of foreclosures in which banks relied on subcontractors to do much of the work.

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Editor’s Note: EVERYBODY wants a piece of bank steak. Investors, including the Federal Reserve are demanding their money back in full for the same reason the homeowners want to rescind the loans — the representations made to each were untrue. And the lies were the same — the value of the property, the propriety of the underwriting process, failure to disclose the lender, borrower(s), co-obligors and terms. EVERYBODY says the participants in the securitization chain — the pretender lenders in the foreclosures — failed to comply with Federal Law, State Law, common law and the terms of the securitization documents. Of course these claims must be proven in court — but on the borrower side they often don’t get the chance to prove their claims because Judges are throwing out their cases without hearing the merits. The assumption remains that the borrowers SHOULD lose even if the investors win on the same points that the borrowers are raising. Why?

In other words, if the investors, the Federal Reserve, Fannie Mae and Freddie Mac get all their money back, the general theory is that we should still let the foreclosures proceed regardless of who gets the title to the house or whether the forecloser (pretender lender) made a windfall profit by getting a house for free. In our political and media circus this has been turned on its head, claiming that borrowers are looking to get out of legitimate debts and get their houses for nothing. So instead the pundits and political geniuses think it is a better idea to give the houses to securitization miscreants who never had a dime in the deal. We hate the banks but we still want them to get the money and the houses too.

All of this is being fueled by a powerful banking lobby joined by real estate brokers whose only source of income right now is sale of foreclosure homes. And Treasury Secretary Geithner is sticking to his guns insisting that stopping foreclosures will decrease our GDP and make our economy worse. So his department is putting out dire warning to scare Judges into thinking that even if the borrowers and the investors are right, the foreclosures should still continue because what’s good for Wall Street and real estate brokers is good for the country. For some of you that reasoning might ring a bell. It’s false. see Treasury Wants Foreclosures to Proceed

A complete halt to enforcement and foreclosures on all securitized loans can only help our economy. It would force all parties to the table where the loans would be modified to fit with reality. Approximately one million homes would be sold as people take jobs where they are wanted but can’t get to because they are under “house arrest” (the result of being underwater in homes that were over-appraised in the first place to steal money from investors).That sounds like a lot of commerce to me and a lot of GDP, broker’s fees, and other fees legitimately charged and earned. Real estate brokers are being played for fools by Wall Street and they ought to be smarten up. They are on the wrong side of this issue and it is getting worse day by day. If they really want to see some business then take the high road and watch the pieces fall into place.

Some foreclosures would proceed with caution, providing a true creditor stands up and makes a claim that is supported by real evidence instead of the mere assertion, as Katherine Porter said, that the borrower MUST be liable and therefore the borrower should lose their homes. The unanswered question is lose it to who, based upon what obligation?

Servicers and other players in the middle are clearly going to take a major hit for their role in this fraudulent scheme of mortgage origination and fraudulent foreclosures. The question that remains is, if this is going to be settled in the courts by a Final Judgment entered by a Judge, and if the investors are entitled to get their money back from the underwriters of the bogus MBS bonds, then the obligation is paid in full and there is no debt. Then who gets the house? Obviously, in the absence of any legitimate claim for a debt due to a legitimate creditor, the homeowner gets the title cleared and the obligation is simply extinguished.

That sounds wrong to a lot of people, but who else would you give it to? And without the hammer hanging over the head of these Wall Street mega banks, who is going to drive them to the table to make the deal that should be made? — preserving some of the value of MBS and related investments, and putting borrowers more or less back in the position of where they were before they signed on to the original bogus deal, just like the investors did.

None of us created the false value of the MBS investments. None of us created the false appraisals of the property validated by a mortgage originator that was not, as they said, acting as a lender, but rather as a broker. Neither the investors nor the borrowers created the vacuum resulting from completely fake ratings sand appraisals. Why should either the investors or the borrowers shoulder the total loss? Why shouldn’t they receive the benefit of the bargain they thought they were getting and either make a little or at least not lose too much?

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Homeowners Facing Foreclosure Demand Recourse

By ANDREW MARTIN and MOTOKO RICH

Ricky Rought paid cash to the Deutsche Bank National Trust Company for a four-room cabin in Michigan with the intention of fixing it up for his daughter. Instead, the bank tried to foreclose on the property and the locks were changed, court records show.

Sonya Robison is facing a foreclosure suit in Colorado after the company handling her mortgage encouraged her to skip a payment, she says, to square up for mistakenly changing the locks on her home, too.

Thomas and Charlotte Sexton, of Kentucky, were successfully foreclosed upon by a mortgage trust that, according to court records, does not exist.

As lenders have reviewed tens of thousands of mortgages for errors in recent weeks, more and more homeowners are stepping forward to say that they were victims of bank mistakes — and in many cases, demanding legal recourse.

Some homeowners say the banks tried to foreclose on a house that did not even have a mortgage. Others say they believed they were negotiating with the bank in good faith. Still others say that even though they are delinquent on their mortgage payments, they deserve the right to due process before being evicted.

Some consumer lawyers say they are now swamped with homeowners saying they have been wronged by slipshod bank practices and want to fight to keep their homes. Joseph deMello, a Massachusetts lawyer who represents Mr. Rought, said the common denominator in many of the cases was an overwhelmed system of foreclosures in which banks relied on subcontractors to do much of the work.

“No one double-checks anything,” he said. “It’s completely high volume and that’s unfortunately what leads to this.”

It may never be known how many homeowners have legitimate claims against the banks, real estate and banking experts say, because lenders do not release such data and because the vast majority of cases never make it to court.

For the last month or so, some of the nation’s largest banks have temporarily halted foreclosures in some states amid accusations that the paperwork used as evidence to oust homeowners was incomplete or signed off by so-called robo-signers who did little to check its veracity.

Even if the paperwork was faulty, the fact remains that most homeowners in foreclosure have not paid their bills, often because they bought more house than they could afford or because they lost their jobs. As a result, they will most likely lose their homes eventually, once the banks clean up their paperwork and resolve any outstanding legal issues.

“We believe that the overwhelming majority of the cases will be that the loan was seriously delinquent and needed to go to foreclosure,” said Paul Leonard, vice president for government affairs of the housing policy council at the Financial Services Roundtable, an advocacy group for the nation’s largest financial institutions.

Consumer lawyers and housing experts acknowledge that it is relatively rare that a bank initiates foreclosure on a homeowner who is current on the mortgage or has no mortgage at all. More common, they say, are instances where homeowners have applied for mortgage modifications but get foreclosed upon anyway.

In a report to Congress released this week, a federal inspector general described the government-sponsored modification program, known as the Home Affordability Modification Program, as deeply flawed.

While about 467,000 mortgages had received permanent modifications under the program, an estimated 3.5 million homes will receive foreclosure notices this year, an increase of 26 percent over 2009, the report says.

“You have this promise of relief for borrowers but actually getting that relief is like a zigzag line from point A to point B,” said Jose Vasquez, a lawyer for Colorado Legal Services.

Ms. Robison’s case is a variation on the theme. When she returned home to Yoder, Colo., outside Colorado Springs, from a holiday trip in December 2008, she found the locks changed and her electricity, gas and water heater shut off. A sign on the door advised her to contact Safeguard Properties, a company hired by the mortgage servicer, Litton Loan Servicing.

The notice came as a shock to Ms. Robison, a single mother of three who is now 36. She had renegotiated her mortgage just months before and was current on her payments. When she finally got back into her house, the food in the refrigerator was rotten and her lawn mower and air compressor had been taken.

When she called Litton, an employee admitted that the company had made a mistake in changing the locks, according to court documents. In order to reimburse her for her losses, Ms. Robison said, the employee told her he would “work something out” regarding her January mortgage payment, so she did not make it, court records show.

But when Ms. Robison paid her February and March mortgage payments, they were returned. And in March, Deutsche Bank initiated foreclosure proceedings. “I’ve been wanting to pay them the whole time, but they basically stopped taking my payments,” she said.

Deutsche has asserted its right to Ms. Robison’s house under a document that is meant to assign ownership of a mortgage note, known as an allonge. But Ms. Robison’s lawyer, Stephen Brunette, says Deutsche Bank is not named in the allonge that the bank submitted during court proceedings and does not appear on any other documents relating to her home.

Both Deutsche Bank and Litton Loan Servicing declined to comment about the case. A Deutsche Bank spokesman noted that the mortgage servicer, not the trustee, is usually responsible for handling foreclosures.

In Michigan, Mr. Rought says that the bank went after the wrong person.

Mr. Rought bought the cabin from Deutsche Bank on Jan. 27, 2009, paying in cash. He spent the next seven months fixing it up in anticipation that his daughter, Hannah, “would live in the house and be away from her parents for the first time in her young life,” court records show.

But in August of that year, when the Roughts pulled into the driveway, they noticed that something was wrong. The American flag was missing, the house had been broken into and the locks had been changed.

The Roughts’ belongings were gone too, including an heirloom dining room table, pots and pans, a pile of firewood — even the bracket used to hang the American flag. A contractor for Deutsche Bank, Field Asset Services, left a sign tacked to the front door, so the Roughts contacted them and said a mistake had been made.

A month later, however, Deutsche Bank’s representatives came to winterize the house, pouring antifreeze in the sinks and toilets and disconnecting the water pump. “We had expected an answer by now and quite frankly am appalled by the total lack of respect and professionalism of your company,” Mr. Rought wrote in a Dec. 1, 2009, letter to Field Asset Services. “We are trying to be patient and settle this peaceably. What would you do?”

Eventually, Mr. Rought hired a lawyer. Deutsche Bank declined to comment, and Field Asset Services did not return calls seeking comment.

Charlotte and Thomas Sexton, of Carlisle, Ky., fell behind on their mortgage payments because the payments on their adjustable-rate mortgage spiked upwards and Ms. Sexton lost her job.

They tried unsuccessfully to sell the home, to refinance it and to modify their mortgage payment. When the Bank of New York Mellon filed a foreclosure notice last summer, they went to a local lawyer, Brian Canupp, who, with the help of a forensic accountant, found a problem in the foreclosure filing.

Last month, a judge tossed out a foreclosure judgment after Mr. Canupp argued that the mortgage trust that claimed to own the Sextons’ promissory note —Mortgage Pass-Through Certificates Series 2002-HE2 — did not exist.

Instead, another trust, called IXIS Real Estate Capital Trust, Series 2005-HE2, claimed to own the Sextons’ note, court records show.

Ms. Sexton said that regardless of who owns her promissory note, she just wants to stay in her home and hopes that the bank will eventually agree to a loan modification.

“We found a mistake,” she said, “that gave us a light at the end of the tunnel.”

Posted in bubble, Corruption, Eviction, securities fraud |