California Real Estate Fraud Report

This Bill comes too late to save many homeowners who were bent over the table by corrupt and inept tactics by the major banks, but it will help many homeowners and possibly save many more from improper, unethical foreclosure practices.

Here is the new law, as copied verbatim from the Office of the California Attorney General’s website:

The California Homeowner Bill of Rights became law on January 1, 2013 to ensure fair lending and borrowing practices for California homeowners.

The laws are designed to guarantee basic fairness and transparency for homeowners in the foreclosure process. Key provisions include:

• Restriction on dual track foreclosure: Mortgage servicers are restricted from advancing the foreclosure process if the homeowner is working on securing a loan modification. When a homeowner completes an application for a loan modification, the foreclosure process is essentially paused until the complete application has been fully reviewed.
• Guaranteed single point of contact: Homeowners are guaranteed a single point of contact as they navigate the system and try to keep their homes – a person or team at the bank who knows the facts of their case, has their paperwork and can get them a decision about their application for a loan modification.
• Verification of documents: Lenders that record and file multiple unverified documents will be subject to a civil penalty of up to $7,500 per loan in an action brought by a civil prosecutor. Lenders who are in violation are also subject to enforcement by licensing agencies, including the Department of Corporations, the Department of Real Estate and the Department of Financial Institutions.
• Enforceability: Borrowers will have authority to seek redress of “material” violations of the new foreclosure process protections. Injunctive relief will be available prior to a foreclosure sale and recovery of damages will be available following a sale. (AB 278, SB 900)
• Tenant rights: Purchasers of foreclosed homes are required to give tenants at least 90 days before starting eviction proceedings. If the tenant has a fixed-term lease entered into before transfer of title at the foreclosure sale, the owner must honor the lease unless the owner can prove that exceptions intended to prevent fraudulent leases apply. (AB 2610)
• Tools to prosecute mortgage fraud: The statute of limitations to prosecute mortgage-related crimes is extended from one to three years, allowing the Attorney General’s office to investigate and prosecute complex mortgage fraud crimes. In addition, the Attorney General’s office can use a statewide grand jury to investigate and indict the perpetrators of financial crimes involving victims in multiple counties.
  (AB 1950, SB 1474)
• Tools to curb blight: Local governments and receivers have additional tools to fight blight caused by multiple vacant homes in their neighborhoods, from more time to allow homeowners to remedy code violations to a means to compel the owners of foreclosed property to pay for upkeep.
  (AB 2314)

The California Homeowner Bill of Rights marked the third step in Attorney General Harris’ response to the state’s foreclosure and mortgage crisis. The Mortgage Fraud Strike Force was created in May 2011 to investigate and prosecute misconduct at all stages of the mortgage process. In February 2012, Attorney General Harris secured a commitment from the nation’s five largest banks for up to $18 billion for California borrowers.

If the allegations in this story bear out, this has to be the most egregious case of a wrongful foreclosure I have ever been told. I hope somebody from the California Attorney General’s Office, HUD, the U.S. Treasury Dept. and other federal agencies reads this article and investigates it fully.

Larry Faulks, a 59-year old disabled man whose home is located in the Diamond Heights community in San Francisco, tells me and other news organizations that Wells Fargo Bank wiped out almost $1 million in equity he owned when they foreclosed on his property while he was in the midst of what he thought was a HAMP loan modification.

Faulks’ parents purchased the home as a new construction in the early 1960s at a time when many developers actively discriminated against minorities by refusing to let them purchase homes in new neighborhoods. There were a number of developers in Diamond Heights but according to Larry, only Eichler Homes did not share this philosophy and the Faulks family became the first African-American family to purchase a home and move to the neighborhood.

Note: According to Wikipedia, founder Joseph Eichler so believed in diversity that he “resigned from the National Association of Home Builders when they refused to support a non-discrimination policy.” This was in 1958.

Several years ago, Faulks contracted a rare antibiotic-resistant staph infection and became disabled as a result. The home, which he and his brother had inherited, had a loan on it for approximately $550,000 which Faulks had taken out to buy out his sister for her share. When he became disabled, he contacted Wells Fargo for a hardship application. He says he submitted several applications on his own and documents were routinely lost. He then submitted documents through a Wells Fargo Home Preservation Specialist and his HUD-approved housing counselors. Those documents were also lost.  He said the bank promised him in writing that it would not foreclose on his home while they were evaluating his application(s) and that he has in his possession letters from Wells Fargo stating the same. Nevertheless, he found out his home had been foreclosed only when a real estate agent showed up to inform him of such on the day the Trustee Sale took place. The home was sold for cash for the amount owed on the note to DMG Asset Management, which gained almost $1 million in equity that was transferred to them at the expense of Larry Faulks.

Wells Fargo claimed it had tried to contact Faulks on a number of occasions but has provided no proof to him in the form of phone logs. Faulks says his only telephone is a cell phone and that he can prove using his own phone records that Wells Fargo only tried to call him one time, that the call was approximately one minute long and that the bank’s employees did not leave a message. He also says they cannot prove otherwise because they simply did not make any genuine effort to contact him.

Note: Considering the millions of dollars that Wells Fargo annually showers on the African-American, other minority and gay communities in the form of sponsoring events and advertising in order to show it is a good corporate citizen (meaning, it wants their dollars), it should step up immediately and do the following: investigate its foreclosure of Larry Faulks‘ home and either offer defnitive proof that all of its actions, from beginning to end, were in violation of no laws and showed no bad faith (wiping out his million-dollar equity) or it should mea culpa and rescind the sale.

Larry Faulks is now fighting eviction from his home of 50 years by DMG Asset Management and certain homelessness since he is minus $1 million in assets. Read an article in the Bay Area Reporter to learn more.

After playing cat-and-mouse as to whether she would remain a hold-out or sign-off on a nationwide settlement between the Attorneys General and five major banks for committing widespread fraud in the signing of foreclosure documents, Attorney General Kamala D. Harris announced today that California will be part of the settlement.

The five banks are Wells Fargo, Bank of America, JP Morgan Chase & Co., Citigroup Inc. and GMAC/Ally Financial Inc.

California will receive $18 billion as its share of the agreement, which sought to penalize robosigning, in which the banks hired $10/hour temporary employees to forge as many as several thousand foreclosure documents  every day, many of which were manufactured to replace lost paperwork on home mortgages.

On the positive side, Harris’ obtained an enforceable guarantee that the named banks will have to provide at least $12 billion in principal reductions to underwater homeowners. Monies will also be allocated so that Harris can expand her Mortgage Fraud Task Force.

On the other hand, today’s settlement is a huge disappointment for homeowners whose foreclosures were illegal in one form or another. The most they will receive is $2,000 which is nothing short of ridiculous.

Also, bank C-suite executives, managers and other employees appear to be off the hook for any criminal acts they may have committed with regard to the robosigning scandal, which is why the banks were so eager to get a blanket agreement from the states.

Read about the settlement in the Los Angeles Times and AG Harris’ press release.

Almost a year after they were outed for engaging in widespread fraudulent foreclosure document signing practices, known as robo-signing, big banks are still engaging in the practice, along with the contractors.

One registrar of deeds on the East Coast said “My office is a crime scene”, referring to his office still receiving large numbers of documents with suspicious or outright fraudulent signatures.

A county registrar in Michigan has referred  Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates, for a criminal investigation for robo-signing. Mr. Isaacs’ name has appeared on foreclosure documents that more than one county’s officials believe have been robo-signed.

Clearly, the settlement that the 14 biggest banks made with federal regulators this past April that promised a cessation of their fraudulent business practices (bank fraud) as well as paying restitution to homeowner on whom they had improperly foreclosed, is a joke.

Read the original article in the Silicon Valley Mercury News.

Does your Attorney General work for you, the consumer and taxpayer, or for Wells Fargo, Bank of America, JPMorgan Chase, CitiGroup and Ally Financial?

An article by Scot Paltrow in Reuters yesterday entitled “States Negotiating Immunity for Banks over Foreclosures” seems to indicate that our state attorneys general want to get the Foreclosure Gate scandal of mega-banks’ robo-signing homeowners into foreclosure off their desks. Never mind that some of the activities of the banks may rise to a criminal level.

The “negotiation” undertaken collectively by the attorneys general of all 50 states would let the five banks collectively pay “up to (my emphasis)$25 billion in penalties and commitments to follow new rules,” rules which any ethical institution would have followed in the first place. In exchange, the banks would receive immunity from civil lawsuits by the states.

At the least, this sounds like dismissing serious corruption by sweeping it under the rug for a pittance.

So, $5 billion per bank for massive and willful corporate malfeasance. That’s less than $100 million per state and chump change for the likes of Wells Fargo, Bank of America, JPMorgan Chase, CitiGroup and Ally Financial. And as usual, no crooked C-suite executives lose any time off the golf course in depositions or court proceedings. It’s business as usual.

According to the Reuters article, only New York State Attorney General Eric Schneiderman has objected to this wink to corporate corruption. And some of the senators on the Senate Banking Committee, including Republican Richard Shelby, have criticized banking regulators for failing to adequately investigate the robo-signing and other anti-consumer practices engaged in by the banks and their contractors, which Reuters alleges continue to this day. 

Read the original article in Reuters.

Read about public banking.

Congressman Alan Grayson (D-FL) has taken his gloves off in a scathing letter he wrote on October 14 to FBI Director Robert Mueller and US Attorney Robert O’Neill of the Central District of Florida, calling for prison sentences for some bankers for improper foreclosing of homes, dubbed Foreclosure Gate.

In his letter, Congressman Grayson accuses banks of “routinely evading laws meant to protect homeowners” and states bluntly that “fraud does not become legal just because a big bank does it.”

Read the letter by Congressman Alan Grayson on Market Ticker.

The FBI is investigating whether banks and other lending institutions may have committed criminal violations in their processing of tens of thousands of foreclosures, in what has been termed Foreclosure Gate. Their determination hinges on whether the rubber-stamping (robo-signing) of the foreclosures was done with criminal intent.

In the meantime, both Bank of America and GMAC (Ally Financial, Inc.) have stated their intent to resume foreclosures in judicial foreclosure states. How successful they will be is an open question, as the attorneys general for all 50 states have initiated joint investigations into the procedures the major lenders have used to foreclose on homeowners. Further, plaintiffs’ attorneys are busy filing lawsuits against the lenders and at least one judge who has thrown out foreclosures, Justice Arthur Schack of State Supreme Court in Brooklyn, has stated for the record that lenders “better file all their paperwork and makes sure it’s done correctly, because they’re asking me to take someone’s house away.”

Read the full article in Yahoo News.

In the ongoing sage of Foreclosure Gate, Bank of America became the first lender to halt foreclosure proceedings against distressed borrowers in all 50 states amid questions about whether it had properly processed foreclosure documents. JP Morgan Chase, Ally Financial, Inc. (GMAC), Wells Fargo and other lenders are under the microscope too, although Wells Fargo denies it failed to follow state foreclosure laws. Despite the self-imposed moratorium, Bank of America claims “Our ongoing assessment shows the basis for our past foreclosure decisions is accurate.”

Despite the denial, Renee Hertzler, a Bank of America employee, has acknowledged in at least one deposition that she routinely signed 7,000 to 8,000 documents per month having to do with foreclosing on residential properties.

Also today, Pittsburgh-based PNC Financial Services Group, Inc. announced it is suspending foreclosure proceedings in the 23 judicial foreclosure states for a month while it conducts an internal review to confirm it has complied with state foreclosure laws.

Read the full article in Yahoo News and MSN.

Amidst new revelations that many of the nation’s major banks may have improperly processed the foreclosure documents of tens of thousands of homes and / or violated the foreclosure laws of many states, a bill that would have legitimized electronic signatures across state lines failed when President Obama rejected it by a pocket veto.

The bill, which has been through Congress several times in the past five years, was put to rest “out of an abundance of caution, and to ensure that those unintended consequences don’t harm consumers”, according to White House press secretary Robert Gibbs.

Both sides of Congress had supported the bill. But Senator Patrick Leahy (D-Vt) noted after the President’s rejection that the recent revelations about the validity of signatures of bank officials on foreclosure documents that “Now that concerns have been raised, Congress should re- examine whether this bill might have had an unintended impact on foreclosures.”

Read the full article in BusinessWeek.

Old Republic National Title Insurance has thrown a monkey wrench into the ability of lenders to sell their foreclosures: on September 29, the company announced that it will no longer issue policies to properties that have been foreclosed by JP Morgan Chase and Ally Financial, Inc. (GMAC). Further, Old Republic will not write title on properties which have been purchased after the foreclosed properties have been listed and sold as REOs (bank-owned property).

Maryln Weiner, a title agent and real estate attorney in Boca Raton, Florida, predicted the disclosure by the two mega-lenders, as well as Bank of America, will

“set us back years.  They won’t insure it after completion after the foreclosure. I think you’re going to see actions to reopen foreclosures that already took place. This will have tremendous consequences and all title companies will do the same thing. We’ve never seen anything like this before.”

What’s even worse is that the buyers of REOs could have their ownership challenged in court by the former homeowners, who may contend the foreclosure judgment has to be set aside due to faulty documents. In that case, the new homeowners may go to the title insurer to cover their financial losses.

The financial impact on title companies, the banks and the U.S. economy is staggering: the National Association of Realtors shows that foreclosed properties make up 34% of sales across the country, up from 31% a year ago.

Read the full article in USA Today.