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The Foreclosure Fraud Settlement

posted by Adam Levitin

The inter-regulator fight over the proper parameters of a foreclosure fraud settlement are really highlighting the changes in the financial regulatory world.  What we're told is that the OCC and Fed are urging a weak settlement, while FDIC, the state AGs, and the Consumer Financial Protection Bureau (CFPB) are pushing for a serious settlement.  

Parts of this line up look quite familiar, but parts are new and exciting.  

There's nothing new or surprising about the OCC protecting (rather than regulating) the banks. Similarly, it's not surprising to see the Fed back the banks, although, the Fed tends to be less gung-ho than OCC in these matters (and I would note that there isn't necessarily unanimity within any agency on these issues). It's also no surprise to see the state AGs on the other side, pushing for regulation. Gosh, this just sounds like a Wachovia v. Watters redeux (one of OCC's most shameful moments in recent years---putting its preemption agenda ahead of consumer protection in the mortgage space. Now where did that get us?)  

Some parts of this line up are new, however, and exciting. Already, we're seeing just how important the Consumer Financial Protection Bureau will be. The CFPB means that there is a voice at the table advocating consumer interests, not bank interests. That's a hugely important counterweight to OCC. This was one of the most important reasons for creating the CFPB--forcing the policy debates to exist on an inter-agency level, rather than making consumer protection concerns take a back seat within agencies.    

This line-up also shows the significant changes that have occurred at FDIC.  Not so long ago, FDIC had been rather permissive about rent-a-BIN in the payday context. Changes at the FDIC started to be apparent at least back in early 2008 when it teamed with FTC to sue a trio of credit card banks for unfair and deceptive practices, and the FDIC has emerged from the financial crisis as an agency that has taken the lead on a lot of financial reform issues, particularly those related to foreclosures, mortgage servicing, and securitization.

The real question in all of this is where does Treasury come out? Or put more precisely, what does Timothy Geithner want? If Geithner backs OCC and the Fed, it will perceived as yet another example that Treasury is captured by the banks. If Geithner backs FDIC, CFPB, and the AGs, this will be taken as an example of the adminstration's hostility toward business.



Whatever the outcome, I think the situation you've kindly summarized just sadly illustrates the metastasis of the bureaucratic state and the degree to which governing has been transferred to unelected personnel.

The book titled "The Hellhound of Wall Street", which focuses on the Pecora Hearings, had a take away message of the first 100 days of FDR's administration. And, that was "When money talked, nobody listened". This quote should guide the current administrations decisions going forward. The most amazing part is that the safeguards that were put into place in those first 100 days worked for more than 50 years, until 1999, when Glass Act was repealed.

Concerning fraudulent foreclosure settlements about who should pay and what amounts should be paid, the ELEPHANT in the room which hides in plain sight is being OVERLOOKED! The Elephant SHOULD BE PROBED, and the responsible persons should be required to pay their share of $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ for tortious conduct, and for deliberately committing manifest egregious Constitutional illegalities in the process of intentional foreclosure fraud! Some people's lives have been permanently damaged during the commissions of frauds! It is IMPOSSIBLE to resolve fraudulent foreclosures without looking at the lawyers who file foreclosure proceedings and the court systems (the Elephant)!!!

On nakedcapitalism, @ http://t.co/9bXCrpF Yves Smith was correct to decry an Alabama foreclosure court ruling and Attorney Paul Jackson’s commendation of it. Also, on Mr. Jackson’s housingwire website, there is much applause for that Alabama court ruling which upheld blatant foreclosure fraud, as well as praise for lawyers who file foreclosures. But, praise for foreclosure illegalities and fraud is an affront to families who are homeless because of foreclosure fraud and greed.

Untrue to what Alabama and other courts, as well as Paul Jackson communicated, lenders are not always the ones who are foreclosing on their security interests! There are foreclosures that NEVER became returned to lenders or banks, but were fraudulently “credit bid” by “Straw Buyers” and judicial insiders. Thus, blight is a common telltale sign! [SEE: “What happens when a bank begins to foreclose on a property, then changes its mind?” by Justin Sondel @ http://bit.ly/i5z3Py.

Notably, Atty Paul Jackson is in the foreclosure business. If I had any investigative authority, he and the foreclosure lawyer colleagues that he refers to in his October 11, 2010 housingwire article, would be among the first targets for extensive foreclosure fraud investigation!

Emphatically, a foreclosure lawyer is the catalyst for the goal of holding a “simulated” auction which gets the property deed recorded out of homeowners’ names. OR not even have an auction at all, but let homeowners think they no longer owner their homes and move out, and a lawyer need not act. But, if they don’t move out, then a lawyer obtains an eviction writ regardless of which lender’s name the lawyer utilizes.

Also, false IRS forms 1099-A’s become filed in homeowners’ name and social security numbers; mortgage default insurance proceeds become paid to the first so-called lender that submits a claim; and the game begins again after the homes become flipped to someone new who is expected to default.

Another reality is that scores of homeowners unfairly, unlawfully become saddled with further debt because of fraudulent “credit bid” at the so-called foreclosure auction. This creates an opportunity for a lawyer to return to court and obtain a “Deficiency Judgment” unlawfully against the homeowners; and some of those judgment debts become sold to ‘debt buyers’ despite that the “deficiency judgment” was carry out through foreclosure deception. The reality is that lots of those people NEVER lawfully lost ownership of their homes.

Additionally, City revenues are cheated out of monies that should be gained from auctioned homes if foreclosure auctions were conducted lawfully. But when insiders are allowed to get homes at “a steal,” lawyers can misrepresent to their lender-clients there was a “deficient” auction bid, while at the same time hide the fact that a crony or insider obtained the property. It stands to reason that, in lieu of paying fees, lenders illegally allow lawyers to keep properties (take it off their hands), which is really a back door third party purchase. Or, when the lender’s name of the foreclosure petition or a bankruptcy “lift stay” motion is DEFUNCT, any such property deal is outright theft!

Also, no one else other than a LAWYER WHO FILES FORECLOSURES --as well as records property deeds after foreclosures even in non-judicial states-- has the alarming ability to defraud Bankruptcy Courtrooms and homeowners by filing FALSE “Lift Automatic Stay” motions and “Proof of Claims.” (Notice TV commercials telling people to come & file bankruptcy?)

It is an awfully unfair game that lawyers play by filing Bankruptcy court motions under names of fabricated lenders, to unlawfully and deceptively defeat provisions under Bankruptcy Law. Even google search of “lift automatic stay” and “proof of claim” will show how they affect homeowners’ rights concerning foreclosures.

Often, on behalf of lenders that DO NOT have “standing,” lawyers quickly and fraudulently file “lift stay” and “dismissal” motions that defeat and dismiss people’s bankruptcy cases. Precisely, fabricated motions grossly, unfairly deprive “debtors” of rights under Bankruptcy Law! In particular, thousands of bankruptcy filers become unlawfully cheated out of the possibility of “avoidance” associated with “unsecured” debt.

If anything, “debtors” could perhaps file “Adversary” proceedings and uncover facts about their lenders and servicers if their cases weren’t dismissed. The bottom line is that courts have nothing over which to preside when there is no real party interest / no “standing.” And clearly, if the court has no jurisdiction over motions that are filed by parties without “standing,” lawyers should NOT be granted their “Lift Stay” motions on behalf of their so-called clients.

How awful when so much fraud has, for decades been the means for dishonest participants in the foreclosure racket to get slices of the “foreclosure pie,” at the devastating costs and effects upon people who –for some reason or another fell behind on their mortgage payments.


For such reasons and many others, I continue call attention to the alarming need for an investigation of lawyers who file foreclosure pleadings in bankruptcy and in civil courts. SEE: “Request for Congressional Foreclosure Panel to Examine Foreclosure Lawyers” @ http://chn.ge/eU2zAm

I really really enjoyed reading this post, which is full of knowledge and information.

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