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More evidence that corporate America is now all about making deals – from Housing Wire:

Iowa Attorney General Tom Miller told more than 200 homeowners and consumer advocates in a meeting Tuesday that the investigation into foreclosure practices at major lenders is drawing to a close, and that negotiations will begin soon.

Major lenders froze foreclosures in October when employees were found to be signing affidavits en masse and without a proper review of the files as required by law in some sates. Miller and the other 50 state AGs along with seven federal regulators launched an investigation into what is now known as the robo-signing scandal.

In December, Miller met with homeowners for the first time, revealing that a possible settlement with the banks could result in payouts to victims, requirements to write down the principal of the loan and even criminal charges for executives.

But in the January meeting, Miller avoided revealing any details of what the settlement could possibly hold, according to a transcript of the meeting Miller’s office released to HousingWire.

“Since we’re really getting close to negotiations, I’m not going to talk about, I don’t feel I should talk about, what’s going to be in the agreement, what isn’t going to be in the agreement,” Miller told homeowners. “That’s something that we have to hammer out with the Justice Department and the federal people, and with the banks in a negotiating session.”

Here’s my 2-part MERS settlement. 1. Have the banks fund Sheila’s “foreclosure claims commission” to dole out settlements to those who were harmed, and 2. Have the servicers pay all the back recording fees owed (or settlement).  MERS is then allowed to continue operations and be required to record all transfers/pay the fees.

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From HW:

If local governments succeed in the fight against how banks have recorded the transfer of mortgage notes through the Mortgage Electronic Registration Systems, home loans could become as expensive as credit cards, K&L Gates Partner Laurence Platt said Wednesday.

At the last panel of the Mortgage Bankers Association summit on the future of mortgage servicing, Platt and Adam Levitin, an associate professor at Georgetown University Law Center, discussed the validity of MERS. The company was created by major lenders to become the single title holder of a mortgage as the owners of the note made transfers back and forth through securitization.

This, Platt said, was a solution to “antiquated filing systems” at the local level. In Chicago’s Cook County, for example, it can take up to a year for a lender to receive a recorded mortgage back at the time of foreclosure, prepayments and other actions.

But local jurisdictions such as the states of California and Virginia are fighting to void foreclosures completed where the lender lays claim to the enforceability of the credit – meaning if the lender can use MERS to prove it has the right to foreclose – on two basis, Platt said.

One, MERS replaces the fees lenders used to pay to local governments for recording these notes, and these governments are claiming the banks still have to pay fees for the transfers. Second, Platt said, they are trying to score political points, which will only end up hurting borrowers in the future.

“My biggest concern is that local jurisdictions are enacting laws that change the centuries old law on recorded assignments in their locales, and that would void all mortgages in their jurisdiction,” Platt said. “But Virginia didn’t require assignments in the past. So, if that law passes, you will not be able to foreclose in the commonwealth in Virginia. It’s turning real property law on its head.”

But Levitin pointed out the inaccuracies and full-out holes in the MERS system. In cases he looked up, often the investor or the servicer on the MERS system did not match what was on the note.

“MERS ceases to track transfers once the loan is moved into another system,” Levitin explained.

Platt admitted there were issues with the system, but he warned that scoring short-term political points could be the end of affordable housing.

“They are making secured credit unenforceable,” Platt said. “If you think you’re going to get 4% mortgages on unsecured loans, you’re wrong. You’re going to get credit card rates. MERS was designed to make it easy to transfer assignments in modern economics.”

She doesn’t say it specifically, but this should be the first step in resolving the MERS/robo-signing debacle with well-rounded settlements for all – from MND:

Federal Deposit Insurance Corporation (FDIC) Chairman Sheila C. Bair called today for a “foreclosure claims commission” to address complaints from homeowners who have been harmed by flaws in the foreclosure process.  This was one of several improvements suggested by Bair, an outspoken critic of the servicing industry, at a “summit” on Mortgage Servicing for the 21st Century sponsored by the Mortgage Bankers Association (MBA).

Bair said that throughout the mortgage crisis “the most persistent adversary has been inertia in the servicing and foreclosure practices applied to problem loans,” and that prompt action to modify unaffordable subprime loans in 2007 could have helped to limit the crisis in its early stages.   Still, 18 months into an economic recovery and with hundreds of thousands of mortgage modifications completed, “mortgage markets remain deeply mired in a cycle of credit distress, securitization markets remain frozen, and now chaos in mortgage servicing and foreclosure is introducing a dangerous new uncertainty into this fragile market.”

Bair spoke, as she has several times in recent months, of misaligned incentives in the servicing business model which she said drove the origination of trillions of dollars of unaffordable subprime and Alt-A mortgages that triggered the crisis.  Now, she said, the fixed fee structure based on volume does not provide sufficient incentives to effective manage large volume of problem loans during a period of crisis.  “Mortgage servicers have remained behind the curve as the problem has evolved to include underwater mortgages and, now, foreclosure practices that sow confusion and fear on the part of homeowners and fail to fully conform to state and local legal requirements.”

This compensation structure drove automation, cost cutting, and consolidation to the point where the market share of the top five servicers has gone from 32 percent to almost 60 percent since 2000.  “When mortgage defaults began to mount in 2007 and 2008, third-party servicers were left without the expertise, the contractual flexibility, the financial incentive, or the resources they needed to engage in effective loss-mitigation programs.”

Responding to the crisis, Bair said, requires all parties involved to recognize that loss mitigation is not just socially desirable, it is wholly consistent with safe and sound banking and has macroeconomic consequences.  “The bottom line is that we need more modifications and fewer foreclosures. When foreclosure is unavoidable, we need it to be done with all fairness to the borrower and in accordance with the law. Only by committing to these principles can we begin to move past the foreclosure crisis and rebuild confidence in our housing and mortgage markets.

The foreclosure claims commission envisioned by Bair would follow the model used to settle claims arising out of the BP oil spill and the events of 9/11.  It would be set up and funded by servicers to address claims submitted by homeowners who have wrongly suffered foreclosure through servicing errors.  Bair said that many in the servicing industry will resist such a settlement because of the immediate financial cost, “but every time servicers have delayed needed changes to minimize their short-term costs, they have seen a deepening of the crisis that has cost them – and the rest of us – even more.”

Hat tip to everyone who sent in the MA court ruling on foreclosures, which should expedite settlement talks – here’s an excerpt from cnbc.com:

95 percent of troubled borrowers currently do not contest their foreclosures, Paul Miller of FBR tells me. He sees this less about the specific case as the perception of this case:

“If you see more and more of these headlines, many people might look at this and say ‘I can get my house free and clear if I just contest the foreclosure and get a favorable judge that sides on my side. All of the sudden I have a free mortgage.’ That’s not what’s going to happen in this case,” Miller said in an interview. He believes these two homes will eventually go to foreclosure.

In fact, this Massachusetts case may not be exactly as the headlines are screaming.

The American Securitization Forum, immediately after the ruling, put out a statement saying, “The ASF is pleased the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages under unique aspects of Massachusetts law.

Importantly, unlike the lower court, tithe Court also said assignments of mortgage can be executed in blank, as long as a complete chain of transfers can be shown through the applicable deal documents.” ASF says those documents were not introduced in the lower court and that the lower court would have ruled otherwise if they had.

“The ASF is confident securitization transfers are valid and fully enforceable,” concludes the ASF’s Executive Director, Tom Deutsch.

Hat tip to David for sending this along, from USA Today:

Steven and Tamara Gewecke are three years behind on their mortgage payments, but they’ve fought off foreclosure.  The Minnesota couple refinanced in 2006 to start a business. It failed. Debts mounted. The Geweckes went bankrupt and failed to win a loan modification. But they bought time.

In 2009, the Geweckes filed a lawsuit to block their foreclosure. At the heart of their case is this question: Who owns their mortgage?

They allege the investor trust that claims to doesn’t because there’s no proper record of the mortgage’s transfer to the trust. Their complaint also alleges that the mortgage didn’t get to the trust until 18 months after the trust closed to new loans. If US Bank, the trustee, can’t prove ownership, it can’t foreclose, the Geweckes say.

The Geweckes want a loan modification so they can stay in their home of 16 years. Their current loan has an adjustable 9.25% interest rate. They owe more on the house than it’s worth.

They’re not looking for a “free ride,” says Steven, 40, who works in marketing. Neither do they want to pay off one firm and then face a future claim by another.  They also hope their case will send a message to mortgage companies that they must obey rules, too.

“I understand that if you don’t make your payments, you’ll lose your home,” says Tamara Gewecke, 41. “But make sure you do it right. Make sure you’ve got your paperwork done.”

Next week, we’re going to make predictions for the new year, and the MERS/robo-signing/securitizations could play a role in the 2011 market – and your predictions? 

Here’s the link to the latest article about BofA’s woes; and an excerpt:

Richard Bove, analyst at Rochdale Securities, believes the issue will continue for the next four to five years.

“It’s going to be like a tobacco or an asbestos situation,” Bove says, arguing court battles will continue evolving for some time at plaintiffs test courts to find successful strategies and Bank of America and other institutions work to find off the evolving challenges.

The MERS/robo will be a gold mine for attorneys – but will it erode homebuyer confidence?  Or end up being a nothing-burger (like ARM recasts, etc.) because the government will spend whatever it takes to avoid a potential meltdown?

Bank of America has a great excuse – “hey, you made us buy Countrywide!”, which could be the clincher that makes the government wave the magic wand (again) and make it all go away. 

Or could the MERS legal issues gain enough steam to over-run the system?

Would the specifics about MERS/robo affect your home buying/selling decisions?

Hat tip to daytrip and geotpf for sending this along, from the WSJ:

OKEECHOBEE COUNTY, Fla.—Patsy Campbell could tell you a thing or two about fighting foreclosure. She’s been fighting hers for 25 years.

The 71-year-old retired insurance saleswoman has been living in her house, a two-story on a half acre in a tidy middle-class neighborhood here in central Florida, since 1978. The last time she made a mortgage payment was October 1985.

And yet Ms. Campbell has been able to keep her house, protected by a 105-pound pit bull named Dodger and a locked, rusty gate advising visitors to beware of the dog.

“They’re not going to take this house,” says Ms. Campbell. “I intend to stay in this house and maintain it as my residence until I die.”

Ms. Campbell’s foreclosure case has outlasted two marriages, three recessions and four presidents. She has seen seven great-grandchildren born, plum real-estate markets come and go and the ownership of her mortgage change six times. Many Florida real-estate lawyers say it is the longest-lasting foreclosure case they have ever heard of.

Read the rest of this entry »

This is the first case that I’ve seen of a deed-in-lieu-of-foreclosure.

Hope we see more of them, maybe they are the answer to the robo-MERS-gate problems. The banks could do cash-for-deed-in-lieus, instead of spending big money on attorneys?

Rolling Stone Magazine reporter Matt Taibbi has a detailed story about the Florida foreclosures being tried in front of retired judges.  Click here for full story – an excerpt:

After Soud’s outburst, Cooper quietly leaves the court. Once out of sight of the judge, she shows me her file. It’s not hard to find the fraud in the case.

For starters, the assignment of mortgage is autographed by a notorious robo-signer — John Kennerty, who gave a deposition this summer admitting that he signed as many as 150 documents a day for Wells Fargo. In Cooper’s case, the document with Kennerty’s signature on it places the date on which Wells Fargo obtained the mortgage as May 5th, 2010.

The trouble is, the bank bought the loan from Wachovia — a bank that went out of business in 2008. All of which is interesting, because in her file, it states that Wells Fargo sued Cooper for foreclosure on February 22nd, 2010. In other words, the bank foreclosed on Cooper three months before it obtained her mortgage from a nonexistent company.

From cnbc.com:

Sources on both sides of the 50-state attorney’s general investigation into so-called “robo-signing” foreclosure practices are nearing a settlement. As Bank of America, JP Morgan Chase, and Iowa Attorney General Tom Miller square off today before the Senate Banking Committee, the framework of a deal is taking shape.

While sources say there is no universal solution to shoddy foreclosure practices at some of the nation’s largest mortgage banks/servicers, the three largest, BofA, JPM, and Wells Fargo, may be agreeing to the same solution.

First, banks would pay into a fund used to compensate borrowers who have claims after their home has been sold in foreclosure. The borrowers would have to prove they were wronged in the process, and the attorney’s general would allocate the funds. In other words, the AGs would be the administrators. The amount of said fund is still undetermined, and likely still in negotiation. Each bank could settle on its own amount, or there could be a joint agreement.

Secondly, the banks would do away with the dual track of modifications and foreclosures. That means that only after all options of modification are exhausted can a bank begin foreclosure proceedings. Many borrowers currently complain that they are in the midst of the modification process when they get a notice of foreclosure sale. The drawback to eliminating the dual track is even greater extended timelines to foreclosure for borrowers. As it is, borrowers on average can be in their homes for a year and a half without making mortgage payments before eviction.

Finally, there would be some kind of agreement to third party mediation for review of all the cases in the first part of the agreement where borrowers are seeking compensation from the AG fund.

There has also been talk of principal write down as part of settlements, perhaps with some banks and not others. “It’s been on the table,” says one source.