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Subject: [SPAM] JPMorgan Suspends 56,000 Foreclosures; GMAC and BOA Many
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Shock Therapy for Wall Street: JPMorgan Suspends 56,000 Foreclosures; GMAC
and BOA Many More
Saturday 02 October 2010
by: Ellen Brown | WebofDebt.com | News Analysis
http://www.truth-out.org/shock-therapy-wall-street-jpmorgan-suspends-56000-f
oreclosures-gmac-and-boa-many-more63803
photo (Image: Lance Page / t r u t h o u t; Adapted:
House Committee on Education and Labor, Emmanuel
Huybrechts)
"Maybe this is like shock therapy. Maybe this will
actually get the lenders to the table and encourage
them to work out deals that are to the benefit of
everybody."
--Economist Karl E. Case, quoted in The New York Times.
The hits are coming fast and furiously. It appears
major Wall Street mortgage lenders could again be in
serious trouble - and looking again for handouts.
On September 20th, Ally Financial Inc., which owns GMAC Mortgage, the
nation's 4th largest lender, halted evictions and the resale of repossessed
homes in 23 states. This was after a document processor for the company
admitted that he had signed off on 10,000 pieces of foreclosure paperwork a
month without reading them. The 23 states were all those where foreclosures
must be approved by a court, including New York, New Jersey, Connecticut,
Florida and Illinois.
On September 24th, Representatives Alan Grayson (D-FL),
Barney Frank (D- MA) and Corrine Brown (D-FL) directed
a letter to Fannie Mae questioning its use of
"foreclosure mills," which were described as "law firms representing lenders
that specialize in speeding up the foreclose process, often without regard
to process, substance or legal propriety." The letter followed a report by
the Florida attorney general's office in August that it was investigating
three law firms that had allegedly fabricated documents in thousands of
cases to obtain final judgments of foreclosure.
On September 24, California attorney general Jerry
Brown asked GMAC to halt foreclosures in his state
until the lender could prove it was complying with a
law that prohibits lenders from taking steps to
foreclose a home before making an effort to work with
the borrower. California is a non-judicial foreclosure
state, meaning foreclosures do not require the prior
approval of a court.
On September 28, JPMorgan Chase said it was halting
56,000 foreclosures because some of its employees might
have improperly prepared the necessary documents. All
of the suspensions were in the 23 states where
foreclosures require court approval.
On September 29, the Washington Post reported that a
top federal bank regulator had directed seven of the
nation's largest lenders to review their foreclosure
processes, after learning about widespread mishandling
of homeowner evictions. Besides JPMorgan Chase, they
included Bank of America, Citibank, HSBC, PNC Bank,
U.S. Bank and Wells Fargo. The Washington Post noted:
"The paperwork problems range from potentially forged
documents to bank employees who never read borrowers'
files before signing off on an eviction. . . ."While we
don't expect our review to find that consumers were
harmed, we will take appropriate action if we find any
impact," JP Morgan spokesman Tom Kelly said."
No harm perhaps except the illegal taking of thousands
of homes without due process . . . .
On September 30, Rep. Alan Grayson posted a devastating seven-minute video,
in which he gave four real-world examples of such travesties of justice,
including a man who was foreclosed on when he didn't have a mortgage and
paid cash for the home; a home that had two foreclosure suits against it
because both servicers claimed ownership of the title; and a couple
foreclosed on over a contested $75 late fee.
[video of Grayson]
Grayson blamed the massive foreclosure problems largely
on the electronic shortcut called MERS. "The banks
simply digitized mortgage titles into a privatized
system, called the Mortgage Electronic Registry System
(or MERS)," he said. "And it did the transfers by
trading Excel spreadsheets among the banks and trusts,
rather than endorsing the notes as required by their
own contracts, by state real estate law and by IRS
rules." He stated that 60 million properties are
recorded in the name of MERS -- 60% of the mortgages in
the USA, and 97% of the loans made between 2005 and
2008.
On October 1, Bank of America announced that it was
delaying foreclosures in 23 states.
The same day, Connecticut Attorney General Richard
Blumenthal took the radical step of putting a halt to
all foreclosures from all banks in his state.
A Box Even Houdini Couldn't Escape?
All of this is a major headache for the banks, but
according to the New York Times, "The companies say
they are reviewing their procedures to take care of any violations." They
seem to think they can correct the problem by redoing some paperwork. But if
the holdings in recent court decisions are upheld, it will not be just a
question of hiring extra staff to clean up some files. For all those
mortgages filed in the name of MERS, say these courts, the chain of title
has been irretrievably broken. Humpty Dumpty has had a great fall and cannot
be put back together again.
MERS is simply an electronic data base. On its website
and in assorted court pleadings, it declares that it
owns nothing. It was set up that way intentionally so
that it would be "bankruptcy-remote," something
required by the credit rating agencies in order to turn
the mortgages passing through it into highly rated
securities that could be sold to investors. MERS not
only has no assets; it has no employees. The thousands
of people enlisted to sign affidavits on its behalf are
merely conduits. The arrangement satisfied the ratings agencies, but it has
not satisfied the courts. Increasingly, judges are holding that if MERS owns
nothing, it cannot foreclose, and it cannot convey title by assignment so
that the trustee for the investors can foreclose. MERS breaks the chain of
title so that no one has standing to foreclose. The homes are effectively
owned free and clear.
That does not mean the homeowners don't owe money to
someone. They do. But the claim for relief is not in
"law" (by virtue of an enforceable contract or rule)
but in "equity" (a remedy provided just because it is
fair), and MERS is not the proper plaintiff. Every MERS
case involves a securitization, which means the real
parties in interest are a group of investors somewhere;
and before the homeowners can be made to pay, the
investors have to come forward and prove not only that
they are the parties owed the money, but the actual
sums they are owed. In some cases they might already
have been paid; for example, by insurers on credit
default swaps held by the investment pool. The
investors are entitled to recover in equity only so
much as they are actually out of pocket, not the full
amount of the original promissory notes, since they
were not parties to those notes and there is no way to re-establish the
chain of title.
What About the Non-judicial Foreclosure States?
Foreclosures have been suspended by JPMorgan, GMAC and
BOA in 23 states, but what about the rest? The others
are non-judicial foreclosure states, which means they
allow foreclosure through a power of sale clause in a
deed of trust without going to court. The presumption
is that if the lender doesn't have to prove his
standing to sue before a judge, he can proceed. State
laws in non-judicial states allow the sale of a
property to satisfy a foreclosure as long as the
trustee follows the regulations concerning notice. That
would seem to violate Constitutional due process, but
the United States Constitution has held that due
process protections apply only when the government is
involved in the taking of property. When a deed of
trust and promissory note are executed between two
private parties (homeowners and lenders), there is no
automatic due process protection. The homeowners agreed
to it in writing; case closed.
But here's the catch: what if the lender signing the
original documents is not the party foreclosing on the property? Then it
becomes a question of fact whether the foreclosing party has authority to
proceed, and that makes it a judicial issue - a question of fact for the
courts. If the foreclosing party can show a clear chain of title - an
assignment or progression of assignments from the original lender to himself
- he is home free. But courts have increasingly been holding that MERS
breaks the chain of title. Foreclosure expert Neil Garfield argues that even
in non-judicial foreclosure states, that means the investors have to go to
court to prove their case. And when they do, they will run up against the
brick wall of MERS. He
concludes:
"There will be a head-slapping moment when title
carriers, attorneys, judges and administrative agencies
and clerks suddenly realize that the monster created on
Wall Street has its equivalent in the public records of counties across the
nation. I doubt if more than 6-7% of all the foreclosures in the past 10
years have resulted in clear title delivered to anyone. And the only
corrective instrument can come from the original owner. That homeowner is
sitting in the catbird seat and doesn't know it. Millions of people who
THINK they have lost their homes still own them and if anyone wants a
signature from those people to clear title, they are going to be required to
pay dearly, which is at it should be. Eventually the purse gets returned to
the victim from whom it was snatched."
To Subsidize or Nationalize?
Where does that leave JPMorgan, GMAC, Bank of America,
and the other major lenders? Investors have massive
claims against these banks, and so do homeowners. A
major title insurance company has already said it will
not insure title to properties foreclosed upon by GMAC
until further notice. Moody's has placed the servicer
ratings of GMAC and JPMorgan Chase on review for
possible downgrade, and the Treasury is asking
regulators for an investigation.
Investment adviser Christopher Whalen thinks we could
soon be looking at more Wall Street bankruptcies. If
so, hopefully we won't fall into the trap this time of underwriting the
losses while letting the banks keep the profits. If we the people are
picking up the tab, we should insist on owning the banks.
Creative Commons License This work by Truthout is
licensed under a Creative Commons
Attribution-Noncommercial 3.0 United States License.
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