Claims And Issues

Webinars Continue FREE for Florida Bar Consumer and Tenant Lawyers!

The third webinar is coming up soon in the Public Interest Law Section's (soon to be the Equal Justice Law Section) Consumer and Tenant Working Group’s 2018 Webinar Series. This third training in four is Lender Force - Placed Insurance Litigation on Tuesday, September 25, 2018 from noon to 1:00 p.m. EST.  These webinars offer Florida Bar-approved CLE credits and are intended for consumer and tenant attorneys.  Here is the link to register:   https://attendee.gotowebinar.com/register/6433230832791616514.

Did I mention that this webinar is free?

Thanks for your interest!

Please Read The Disclaimer.  ©2018 Dennis J. Wall.  All Rights Reserved.

"INSURANCE CLAIMS AND ISSUES," THE BOOK: COMING IN 2016!

 

 Storm Clouds lined up over the Gulf of Mexico.  Photograph and text copyright 2015-2016 by Dennis J. Wall.

I am hard at work on an anthology of the best blogs from "Insurance Claims and Issues."  The anthology I submit to my publisher will keep all hyperlinks intact, including links to the Insurance Claims and Bad Faith Law blog.  When articles posted on Insurance Claims and Bad Faith Law blog are important to the anthology of "Insurance Claims and Issues," I am including them in the anthology too.

As each previously posted article is updated, the posted articles will remain just as available here as they always have been.  New articles will benefit from me being better informed and better equipped to discuss future insurance claims and issues.

I have contracted with Thomson Reuters (West Publishing Company to those fortunate to have the experience) to publish "Insurance Claims and Issues," the Book, in the late Spring or early Summer of 2016.  Best wishes to everyone for a joyous and Happy New Year!

Please Read The Disclaimer.  ©2016 by Dennis J. Wall, author of "Insurance Claims and Issues" (forthcoming Thomson Reuters 2016).  All rights reserved.

Related articles

Convincing Anyone Yet? Coverage, Contraception, and the Court.

CYBERINSURANCE:  MANY DATA-LESS RISKS TO UNDERWRITE & PREMIUMS TO CHARGE.

THE ALI RESTATEMENT PROJECT OF THE LAW OF LIABILITY INSURANCE.

Majority Holds No Negligence Cause of Action by Insured Against I.A.

WITHOUT FANNIE, FREDDIE, WILL MONEY COME FROM MORTGAGE INSURERS …

 Copyright Shutter_M; Image by Shutterstock.

OR FROM BIG INVESTMENT "BANKS"*, DO YOU THINK?

The answer to this question comes from the facts we know and not from the opinions we may cherish:

Allowing too-big-to-fail banks to dominate the nation’s mortgage market would crowd out smaller lenders and expand the federal safety net, putting taxpayers at greater risk of funding bailouts in a downturn. Relying on mortgage insurers to provide that capital also seems dubious given how badly these companies performed in the 2008 crisis.

Gretchen Morgenson, "Insiders Aid Big Banks in Effort to Displace Fannie and Freddie" (Monday, December 7, 2015, posted online with the headline, "A Revolving Door Helps Big Banks' Quiet Campaign to Muscle Out Fannie and Freddie").  [Emphasis added.]

Well, we know the answer to that one.

*"Big banks" are investment banks.  They do not take deposits.  They make investments.

Please Read The Disclaimer.  ©2015 by Dennis J. Wall, Co-Author of "Catastrophe Claims / Insurance Coverage for Natural and Man-Made Disasters" (Thomson Reuters November, 2015).  All Rights Reserved. 

Did you know that the foreclosure crisis ended? Read on.

          Home and condominium prices have been on the rise all through the Fall of 2014 through today, the Summer of 2015.  The Federal Housing Administration is receiving pressure from realtors and mortgagees such as lenders, to backstop with taxpayer funds what amount to subprime mortgages.  The realtors and mortgagees argue apparently that a guarantee from the FHA will provide people with the capacity to purchase condominiums who do not have that capacity without a guarantee.^FN1  A former head of the FHA, whose current position is as head of the Mortgage Bankers Association, is among those pushing the view that the foreclosure crisis has abated.^FN2

          Upon the same reasoning, the Chief Operating Officer of a business organization named “ReadySetLoan” also wants the Federal Housing Administration to guarantee purchases by seniors of reverse mortgages.^FN3

 

^FN1 See Kenneth R. Harney, “FHA Squeezing Loans for Condos Despite Surging Demand” (Los Angeles Time Online, posted Sunday, November 9, 2014.)  [Don't let the annoying ads distract you.  You can easily delete the ads or wait them out if you want.]

 

^FN2 See Kenneth R. Harney, “FHA Squeezing Loans for Condos Despite Surging Demand” (Los Angeles Time Online, posted Sunday, November 9, 2014.)

 

^FN3 See Kenneth R. Harney, “FHA Squeezing Loans for Condos Despite Surging Demand” (Los Angeles Time Online, posted Sunday, November 9, 2014.)

 

Reprinted with the permission of Thomson Reuters and the author from the manuscript of the author's 2015 Supplement chapters, and particularly Section 3:112, in “Litigation and Prevention of Insurer Bad Faith, 3d” ©2015 by Thomson Reuters.

U.S. ATTORNEY PURSUES POLICY OF RECOVERING FHA MORTGAGE INSURANCE LOSSES.

 

This post updates the article published on Insurance Claims and Bad Faith Law Blog on Sunday, April 7, 2013, "FIRREA is Not a Furry Creature for D&O Insurer DJA".  See also the post on Insurance Claims Bad Faith Law Blog published on Tuesday, April 9, 2013, "MISCONDUCT INDUCING FHA INSURED MORTGAGES: LITIGATION ALLOWED DESPITE SETTLEMENT AGREEMENT ".

 

          The Department of Justice appears to have begun a policy of filing civil lawsuits to recover Insurance payments made by the Federal Housing Administration (FHA).  These lawsuits involve allegations against Directors and Officers of Mortgage loan originators inducing the FHA to insure Mortgages which has cost the FHA millions of dollars and will cost the FHA more in past and future Insurance payments on account of the bad and baseless Mortgages in question.  The enforcement of this policy clearly appears to be left to the local United States Attorneys.

For example, such a lawsuit was filed on Thursday, April 4, 2013 by the United States Attorney's Office for the Southern District of New York.  In it, the United States based its action on the following legal sources:  "The Government brings this action seeking damages and civil penalties under the False Claims Act, 31 U.S.C. §§ 3729 et seq., the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 ("FIRREA"), 12 U.S.C. § 1833a, and the common law."  (Paragraph 1, page 2, Complaint, United States v. Movtady and Golden First Mortgage Corp., Filed April 4, 2013, S.D.N.Y. Case No. 13-cv-02227, 32 pages).  Download Complaint.United States of America v. Movtady and Golden First Mortgage Corp. (SDNY Filed 04.04.13, Case No. 13.cv.02227)

          The "common law" Claims include alleged "Gross Negligence," negligence, and Breach of Fiduciary Duty.

          If successful, this civil action and other lawsuits like it, may return substantial amounts of money to the Federal Treasury, which of course means returning substantial amounts of money to the Federal Taxpayers.  The United States Attorney's Office seeks not only Compensatory Damages in this Complaint, but also Penalties and Treble Damages.  The total award could be as much as $100 Million.

Please Read The Disclaimer.

Part 3 of 4: Residential Mortgage-Backed Securities Working Group ...

... Is the Fix In?

This is the Third in a series of Four posts.  The series began on Insurance Claims and Issues Web Log on Monday, January 30, 2012 and continued on Insurance Issues and Bad Faith Law Blog on Tuesday, January 31, 2012.

   After HUD Secretary SHAUN DONOVAN had his meeting with Democratic Attorneys General in Chicago to try to convince them to settle with the Banks for their unknown liabilities from the Great Financial Fiasco (see post 1), the Illinois Attorney General joined the Residential Mortgage-Backed Securities Working Group.  However, she is not listed as one of the five (5) Co-Chairs appointed to run the Group, even in her own press release.  None of the press releases released to date clarify her participation.  See, e.g., Illinois Attorney General's Press Release, January 27, 2012, "Attorney General Madigan Joins National Mortgage-Backed Securities Working Group"; Jim Puzzanghera, "New Initiative Will Coordinate Probes of Mortgage Meltdown" (Los Angeles Times Online, January 27, 2012).

   The Attorney General of Delaware is the son of the Vice President of the United States.  However, Attorney General Biden has carefully crafted his statements about the Federal Residential Mortgage-Based Securities Working Group, and about the scope of the Great Financial Fraud settlement with the Banks that is so highly favored by the Administration of which his father is a member.

   Attorney General Biden has made it clear that he will support the Federal RMBS Working Group, and even participate in it, but his participation in the Working Group does not include participating in any settlement demanded by the Banks before the State investigations are concluded into what the Banks actually did, and for which they now demand immunity in a settlement.   See Interview of Delaware Attorney General Joseph "Beau" Biden, III with Dylan Rattigan, entitled, "DE AG Beau Biden:  Too Big to Fail Banks Believe The Enforcement Side is 'Scared'".

The "New Golden Rule":  "The One Who Has The Gold, Makes The Rules."

      Even if further staffing of the RMBS Working Group may include some State or other non-Federal employees, apparently the Federal Government will fund it.  See Edward Wyatt, "New Fraud Investigation Group Issues Subpoenas to Financial Companies" p. B3, col. 1 (New York Times Nat'l ed., "Business" Section, Saturday, January 28, 2012).

Not Participating, Yet, But Continuing to Pursue Investigations They Began Long Before the Federal Government's New Working Group.

   As of the beginning of this week, or as of Monday, January 30, 2012, there was no announcement, let alone a press release, about the Federal RMBS Working Group, on the websites of any of the three other State Attorneys General who have expressed reservations about, or withdrawn from the current Mortgage Servicer Fraud settlement talks with the Banks:

1. California;
2. Massachusetts; and
3. Nevada.

As noted, they filed lawsuits long before the Federal Government got around to releasing press releases about the new Federally headed Residential Mortgage-Backed Securities Working Group.

To be continued in the final installment of this series, on Insurance Claims and Bad Faith Law Blog.

Please Read The Disclaimer.

Silence on the Mortgage Fraud Settlement Front, For Now.

This updates posts here and on Insurance Claims Bad Faith Law Blog addressing why and how the Attorney Generals of California, Massachusetts and Nevada, among other jurisdictions, have all rejected the idea of engaging in settlement talks over uninvestigated, unknown liabilities of Mortgage Servicers and their Banks as a part of settlement negotiations over established fraudulent Mortgage lending and servicing practices.

   Talks led by the Iowa Attorney General, with assistance and a push from the Obama Administration, apparently continue with Mortgage Servicers and Lenders to settle potential claims over their Mortgage servicing and lending practices.  The talks apparently continue even without the California Attorney General, and without the approval of Attorneys General from other jurisdictions including Massachusetts and Nevada:

Why strike a deal -- one that would, say, shield banks from new litigation over toxic loans, flawed securitizations and the mess at MERS, the registry that has made such a jumble of land records -- without knowing what happened?

Gretchen Morgenson, "Fair Game / From East And West, Foreclosure Horror Stories" p. 1, col. 1 (New York Times Online, "SundayBusiness" Section, Sunday, January 8, 2012).

   Why, indeed?

Please Read The Disclaimer.

Insurance Financials Down, Claims Climb... And Professor Elizabeth Warren.

   The financial condition of many Insurance Companies appears precarious this day.  Many different lines of Insurance and the Companies which are in the business of making money from issuing Policies along those lines, all seem to be represented in the class of companies incurring financial adversities.

   Hartford Financial Services is repurchasing $500 Million of its own shares, reflecting a good financial condition, but Hartford released other news simultaneously which does not at all reflect a good financial condition.  For example, Hartford announced that its 2Q 2011 net income is down 68% from 2Q 2010, due heavily to Catastrophe Claims from Natural Disasters.  See Erik Holm, Joan E. Solsman, and Mia Lamar, "Insurance / Buyback From Hartford; Prudential Earnings Rise" p. C2, col. 5 (Wall Street Journal Thursday, August 4, 2011; Wall Street Journal Online subscription required to access).  On the subject of Catastrophe Claims, see generally John K. DiMugno, Steven Plitt and Dennis J. Wall, "CATClaims:  Insurance Coverage for Natural and Man-Made Disasters" (West 2008; 2011 Supplements).

   The same print newspaper report advises that Prudential Financial bucked the trend.  Something called "U.S. insurance" leaped by nearly half, to $179,000,000.00 or $179 Million in what were apparently operating earnings in 2Q2011.

  And the same print newspaper report has it that the huge Broker, Marsh & McLennan Company, reported its 2Q2011 profit increased 19%.

   PMI, which issues -- or issued -- Mortgage Insurance Policies, has announced that its loss of approximately $3,000,000,000.00 or $3 Billion due to the Great Collapse since 2007, may have no choice but to stop issuing Mortgage Insurance Policies at all.  See Erik Holm, "Mortgage Insurer PMI Warns of Shutdown; Shares Plummet" (Wall Street Journal Online Thursday, August 4, 2011)(subscription required to access).

   And Lloyds -- Banking Group PLC, that is -- reported a Loss of $3,780,000,000.00 or $3.78 Billion which it attributes mostly to its sale of something called "faulty payment-protection insurance."  Margot Patrick, "Lloyds Posts 2.3 Billion [Pound] Loss" (Wall Street Journal Online Thursday, August 4, 2011)(subscription required to access).

On recent financial and other fallout, see Credit Slips / A Discussion on Credit, Finance and Bankruptcy Blog.  In particular, scroll down among the Comments to the post of August 2, 2011, by Bob Lawless, "Warren's Farewell Letter to CFPF Staff," to read Professor Elizabeth Warren's compelling Farewell.

Please Read The Disclaimer.

Fiduciary Duties of Trustees of Mortgage Loan Securitizations: ...

... The Two Attorneys General of the Two States Imposing Duties Investigate.

   Trustees of Mortgage Loan Securities, such as reportedly Bank of New York Mellon and Deutsche Bank, may have had a Fiduciary Duty to examine whether the paperwork was proper and, if not, to require that it be made proper for the protection of the Investors in the Trust.  The Securitizations were also reportedly set up mostly in New York State, and the rest in Delaware.  If so, only New York and Delaware Law would seemingly apply.  Only New York and Delaware Fiduciary Law would impose obligations of inquiry, disclosure and Good Faith and Fair Dealing, for examples.

   It is of great interest to Mortgage Investors and Trustees therefore that the New York State and Delaware State Attorneys General are investigating whether the Trustees violated any of their Fiduciary Duties at the beginning of their trust responsibilities, when they received the Mortgage Loan Securitization papers and presumably were or should have been on inquiry.  See Gretchen Morgenson, "Two States Ask if Paperwork in Mortgage Bundling Was Complete" p. B1, col. 2 (New York Times, "Business Day" Section, Monday, June 13, 2011).

 Although this news is probably too recent to draw attention on other sites, in general terms it appears to be questionable how far the Fiduciary Law of Delaware would adapt to the situation under investigation by the Attorneys General.  See generally "Delaware Corporate and Commercial Litigation Blog".  New York Law may or may not present a different story.  See also "Contracts Law Fallout From the Madoff Affair" (Contracts Prof Blog posted May 31, 2011).  In addition, see also the post here about recent Court decisions including the New Jersey Federal District Court decision addressed in the post here on May 25, 2011, "Rescission of JPMorgan Chase Mortgage Coverage:  'Materially False or Misleading'...".

Please Read The Disclaimer. 

Foreclosures Overwhelming Courts: Problem No. 1, and Solutions in Good Faith.

This is the second in an occasional series of posts on this problem.  The series continues on Insurance Claims Bad Faith Law Blog today.

The effects of this systemic problem on Mortgage Insurance are among the issues to be addressed in this series.

Please Read The Disclalimer.

Frivolous Foreclosure Fraud Attempt to Overcome Courts.

    There is a business model that requires the filing of Foreclosure lawsuits, and in overwhelming numbers.  If you look in the dictionary, as they say, there is a picture of that next to the word "frivolous."

   The model on which our Court system is built requires a case-by-case determination.  (This is particularly true in an era in which class actions are disfavored.)

   Proponents of the Frivolous Foreclosure Lawsuit model know this about the Court system's model.  They know that filing Foreclosure Lawsuits in overwhelming numbers will likely make it easier for them to foreclose because otherwise their own lawsuits will threaten to overcome the Court system.

   One of Florida's responses, for example, to the filing of an overwhelming number of Foreclosure Lawsuits, was to launch a so-called "rocket docket" for them.  Foreclosure Lawsuits on the "rocket docket" would supposedly be handled quicker because retired Judges would be hired to set Hearings and resolve a greater number of Foreclosures, often in Lawsuits that were not contested.   Now, the budget for the rocket docket in Florida is reportedly coming to an end.  See "Demise of the Rocket Docket" in Beth Kassab, "What to Watch This Summer" p. 1, col. 4 (Orlando Sentinel "Central Florida Business" Section, Monday, June 6, 2011).

   It is easy to predict that with the demise of the rocket docket in Florida, whatever its shortcomings and whatever its strengths, pressure will rise on the Court system to once again resolve the "backlog" of lawsuits that will descend upon Florida Judges.  In fact, that was the reason for instituting a "rocket docket" for Foreclosure Lawsuits in the first place, to relieve the Court system of the pressure of a "backlog" of cases -- the vast majority of them being recently filed Foreclosure Lawsuits.

   If the Court system does not take measures to again accommodate them, Plaintiffs in Foreclosure Lawsuits may also attend Court-ordered Mediations without any tangible inclination to settle the Foreclosures, ask the Courts to relax evidentiary rules, to shorten Hearing times, or to reduce Notice requirements, among other things.  These things already appear to be happening in many reported cases.  There is an irony here.  Many of the Foreclosure Plaintiffs -- banks, large lenders -- object loudly to so-called "frivolous" lawsuits being filed by other people.

   In light of the current situation, I plan a series of occasional posts on the issue.  I want to reiterate how we got here, where we are now, and what can be done about this problem that affects the very existence of the System of Justice I have served throughout my professional career.

Please Read The Disclaimer.

Rescission of JPMorgan Chase Mortgage Coverage: "Materially False or Misleading" ...

... Says Its own Insurer in Unilaterally Rescinding Insurance Coverage for JPMorgan Chase's own Mortgage Losses.

 

Brief Summary of the Federal Court's Holding:

JPMorgan Chase had no claim against its Mortgage Insurance Company for Rescission of JPMorgan Chase's own Mortgage Insurance for Mortgage Losses.  The Mortgage Insurance Company Rescinded Because Chase and Wamu Supplied the Mortgage Insurance Company With "Materially False or Misleading" Information Which Chase Certified.

   Many bankers have told newspaper reporters that no remedies exist on account of the Great Economic Fiasco and particularly the Subprime Mortgage Crisis.  Moreover, many bankers have verbally shifted all blame for their issuing Subprime Mortgages to the people who received them.

   In a recent decision, a Federal Court held that JPMorgan Chase was responsible for giving information to its own Mortgage Insurance Company which allowed the Mortgage Insurance Company to Rescind Chase's own Coverage because the information was "materially false or misleading".

The Federal Case:  Download JPMorgan Chase Bank, N.A. v. Republic Mortgage Insurance Co. (D.N.J. Case No. 10.06141, Opinion Filed May 4, 2011) PUBLIC RECORDS ACCESS, 2011 WL 1750439 (D.N.J. May 4, 2011).

   Republic Mortgage Insurance Company issued Mortgage Insurance Policies to JPMorgan and to Washington Mutual Bank ("Wamu").  The Mortgage Insurance was "on residential loans in which a borrower makes a down payment that is less than twenty percent of the property's purchase price."  Download JPMorgan Chase Bank, N.A. v. Republic Mortgage Insurance Co. (D.N.J. Case No. 10.06141, Opinion Filed May 4, 2011) PUBLIC RECORDS ACCESS, 2011 WL 1750439 *1 (D.N.J. May 4, 2011)(authorized password required to access Westlaw).

  The Court in this case referred to JPMorgan Chase and Wamu collectively as "Chase".

   The RMIC Underwriters were careful.  They wrote Mortgage Insurance Policies that required Chase, their Policyholder-Insured,  to represent that the information provided on each of these Mortgages "was 'not false or misleading in any material respect'" in order to get the Coverage.  JPMorgan Chase Bank, N.A. v. Republic Mortgage Insurance Co., 2011 WL 1750439 at *1.

   As quoted by the Court in this case, three (3) standard provisions in just about any Insurance Policy and application then came into play together here regarding each Mortgage to be covered by the Policy:

1. "Pursuant to the terms of the Policies, RMIC agreed to pay Chase, in consideration of the premium paid and 'in reliance upon [Chase's] representations and statements made in any Application for coverage' under the Policies, certain losses incurred as a result from the default by a borrower on a mortgage loan."
2. Chase was required to provide the Insurance Company with information about each loan before there would be Coverage under the Policy for each particular loan transaction, i.e., for each such Mortgage insured under Chase's Insurance Policy with RMIC.  There were two general types of information which Chase could choose to provide.  "In either case, Chase represented to RMIC that this information was 'not false or misleading in any material respect ....'"
3. Under the Policies, Republic Mortgage had the standard right "'at its option and to the extent permitted by applicable law, to cancel or rescind coverage'" if any of the representations made by Chase "in the insurance application were materially false or misleading".

Id. at *1.

   Republic Mortgage unilaterally rescinded.  JP Morgan Chase sued.  Chase alleged three claims or Counts:  Declaratory Judgment, breach of contract, and Bad Faith.  Chase based all three claims on the same one contention:  Chase argued only that Republic Mortgage should have gone to Court to rescind Chases' Policies and not rescinded them on its own.

   Chase did not allege that it did not make any material misrepresentations in its loan applications, said the Court in this case.  Chase's Count I was, it bears repeating, for a Declaratory Judgment "that RMIC cannot rescind coverage for a loan without first commencing litigation," id. at *1.  The Plaintiff and Insured in this case was of course Chase itself suing on its own Coverage with Republic Mortgage, and the Court made note of the following:

Nowhere in Count I does Plaintiff allege that the insured did not make any material misrepresentations in its loan applications for the Policies, which would render RMIC's rescission fraudulent.

Id. at *3.

    The Federal Court granted Republic Mortgage's motion to dismiss all Counts, with leave to Chase to amend to allege individual, specific Mortgage transactions, if Chase be so advised.

   It has been said that the great glory of the common law is its capacity for growth in the direction of obvious propriety.  With that in mind, this is a case to be followed.

Please Read The Disclaimer.

  

HUD Program Offers Hope of Relief ... to Mortgage, Title Insurers.

 

   There is a program to take the squeeze off Mortgage Insurance Companies and Title Insurance Companies.  Do you remember the sensation of losing blood when you were punched in the nose during your childhood (not that long ago)?  Mortgage Insurance Companies and Title Insurance Companies have been paying money to lawyers and on Claims a lot since late 2006, early 2007.

   The program to let up the pressure is not a proposal.  It is operational.

   However, you and your clients may never see it.  You may only get the chance to read about it in online newspapers from far-away places.

   The program is called the Emergency Homeowners Loan Program.  It is a joint effort by the United States Government through Housing and Urban Development, and the State Governments.  Therein lies a snare.  Will your State Government participate or will it turn away program money to preserve Mortgage Servicers' and Mortgagees' current streams of income?

   The only Homeowners who should even think about applying for the Emergency Homeowners Loan Program, where it is available, are people who:

• Have lost income during the Great Economic Collapse or because of a medical condition;
• Are 3 to 12 months behind on their Mortgage payments, interest, principal, and servicing fees hidden and disclosed;
• Are a Defendant or about to become a Defendant in a Foreclosure lawsuit filed by a Plaintiff who may or may not know who really owns the Mortgage;
• Have income below the median income of their neighbors; and
• Have what is reported to be "a 'reasonable likelihood' of resuming mortgage payments within two years."

See Ovetta Wiggins, "Maryland Joins HUD Foreclosure Loan Program" (Washington Post Online, Friday, April 1, 2011).

   After meeting each of these qualifications, an eligible person can receive a maximum loan of $50,000.00, hardly enough to pay down the Mortgage on any property in the high-rent district, so to speak.  The loan is limited to 12 months "of overdue debt" as well.

   Under the business model which existed some 30 years ago, under which Homeowners payed off their Mortgages to banks and were done, this program would have made enough profit even for the banks.  Under the business model which caused the Great Collapse, and which is inexplicably still in charge of us, this program will undoubtedly be opposed by those who stand to make even more money from interminable debt followed by Foreclosures.

   For the sake of the Mortgage Insurance Companies and the Title Insurance Companies, in addition to the Homeowners, this program is worth joining.  You and your clients can join it, if your State Government is available to meet your needs and the needs of your clients, and of the distressed Mortgage and Title Insurance Companies.

Please Read The Disclaimer.

  

Mortgage Insurance Absolutely No Antidote for Radioactive Investments.

'It was so good, they had to do it again.'

   Mortgage Insurance reportedly is being hyped as  a way to "protect against the increased risks in loans that have smaller down payments."  See Gretchen Morgenson, "Fair Game/Note to Banks:  It's Not 2006 Anymore" p. 1, col. 4 (New York Times, "SundayBusiness" Section, Sunday, March 27, 2011).

   Reportedly, lenders are on the receiving end of sales pitches to require smaller down payments when or if they make home loans.  (Yes, again.)  They are being told that Mortgage Insurance will pay if the buyer does not.

   There is a problem with that sales pitch.  The problem is reality.  Instead of making payments on Mortgage Insurance Policies at all times since the current Financial Fiasco began, Mortgage Insurance Companies took a different view of the situation.  They are attempting to rescind those Mortgage Insurance Policies which were, they say, based on fraud and misrepresentation.

   If you or your banking clients think that Mortgage Insurance Companies will change their approach in 2011, please think again.  Ask the Mortgage Insurance Companies what they will do, not the people who make money from convincing you to trust them and not your lying eyes. 

Please Read The Disclaimer.

Banks', Builders' Unemployment Solution: Buy Insurance to Insure Paying Them.

"Everything is changing. Nothing is new.":  Old saying.

   It is not actually newsworthy that builders and bankers want you and your clients to pay Premiums on Insurance Policies for the purpose of insuring your Mortgage Payments.  It has always been called Mortgage Insurance.

   The answer to the question of who really wants this type of Insurance is answered by who gets money from selling it to you and to your clients.  They are not you or your clients.  They are instead the builder who sells you a new house and folds the Premium amounts into the purchase price that the builder receives from you, and the banker who receives the Insurance payment if you cannot make your Mortgage payment to the bank.  The builders and the banks in 2011 are offering this Insurance to you and to your clients for "free," they say, although the Premium amounts are still part of the purchase price and so they are part of the amount mortgaged too.  Another "new" approach by builders and bankers urging you and your clients to get this product is that this Insurance is just the right financial product to continue to make payments in the event that you or your clients lose your jobs -- continue to make payments to them, the builders and bankers of course.

   The current developments are reported by Kenneth R. Harney, "Builders, Banks Offer Free Job-Loss Insurance to Home Buyers" (Los Angeles Times Online, latimes.com, Sunday, March 27, 2011).  The reporter in this linked newspaper article suggests that in at least some situations "job loss coverage can be a 'why not?' proposition."

   Before you advise your clients to purchase this sort of Coverage, or buy it for yourself, consider just how important it is to you and to your clients to continue to make payments on a Mortgage even if jobs are lost and people die and any of the other events occur that make payments on a Mortgage perhaps of less concern to you than to the builders and bankers who try to convince you to buy the Insurance.  And consider just how important it is to finance the Premium payments for such Insurance through your Mortgage over a term of say 30 years, rather than purchasing the Insurance directly from the Insurance Company and perhaps purchasing Coverage that also provides for payments to you or to your clients and not just to Mortgagee Banks.

   Builders build and sell houses.  Bankers sell Mortgages.  Their expertise in selecting Insurance products is likely nonexistent, it is not what they do for a living.  Your expertise in buying Insurance is better than theirs.  Realize that, and ask questions.

Please Read The Disclaimer.

Mortgage Servicing Bill of Good Faith and Fair Dealing?

    Here is the question and the predicate for it:

When you take out a home mortgage, do you expect to be treated fairly and competently by your bank or loan servicer?

Most likely you do. But the widely publicized "robo-signing" and foreclosure scandals suggest that for thousands of homeowners, fair dealing and competence have not been routinely available at some of the largest mortgage servicing operations in the country.

Kenneth R. Harney, "Borrowers May Get a Mortgage Servicing Bill of Rights/In Response to Alleged Abuses, State Attorneys General Have Crafted a Draft Proposal That Sets Out Minimum Standards and Operating Procedures That Would Govern How Homeowners Are Treated" (Los Angeles Times Online, Sunday, March 20, 2011).

   The 50 State Attorneys General propose this answer:  As a central part of their proposed settlement with "the 14 biggest banks and servicers," mortgage servicers would agree to a new mortgage servicing bill of rights for consumers setting out "minimum standards and operating procedures that would govern how homeowners are treated."  Kenneth R. Harney, "Borrowers May Get a Mortgage Servicing Bill of Rights/In Response to Alleged Abuses, State Attorneys General Have Crafted a Draft Proposal That Sets Out Minimum Standards and Operating Procedures That Would Govern How Homeowners Are Treated" (Los Angeles Times Online, Sunday, March 20, 2011).

   The core of the proposed minimum standards and operating procedures is Good Faith and Fair Dealing.

 

As an aside, the title of the linked newspaper article refers to "alleged abuses" concerning mortgages.  That seems like newspapers' way of describing criminals caught red-handed, as "alleged perpetrators".

Please Read The Disclaimer.

 

 

Representations, Warranties and Settlements, Continued ... Settle Them and Seal Them.

   Hard on the heels of yesterday's post on the Insurance Claims Bad Faith Law Blog comes news of a settlement by Bank of America with the Federal Government's Fannie Mae and Freddie Mac.  See Ben Protess and Eric Dash, "Bank of America Buys Back $2.5 Billion in Mortgage Debt" p. B3, col. 5 (New York Times Nat'l ed., Business Section, Tuesday, January 4, 2011).

   BOA is reportedly negotiating settlements of "so-called put-back claims from insurance companies and more than a dozen private investors that bought roughly 160 troubled mortgage securities from Countrywide [since acquired by BOA]."  Id.  These are the sort of claims which BOA successfully settled with Fannie and Freddie.

   This seems to be the first wave of BOA's settlement strategy to reduce or eliminate all such claims, which involve alleged representations and warranties given by Countrywide to each and all of the investors that the mortgage securities met Countrywide's Underwriting standards or Countrywide would buy the mortgage securities back if they did not meet its Underwriting standards, as was posted on the Insurance Claims Bad Faith Law Blog yesterday.

    BOA appears to be singling out Fannie and Freddie first, not simply because of the size of the debts being settled, but because the Federal Government (such as the S.E.C., for recent public examples) does not present much expertise in settling claims with large financial institutions, for whatever reason.

   Once BOA settles with Fannie and Freddie -- and the point behind the present reports is that BOA has successfully settled with Fannie and Freddie -- it should become easier for BOA to reach other settlements with other investors who have less at stake than Fannie and Freddie -- i.e., the Federal Taxpayers -- did.  That would leave only those claims of warranties and representations, i.e., "put-back claims," which cannot be settled and must continue to be litigated or even tried.

   This apparent strategy also raises Insurance Coverage Questions, including:

1.  What sorts of Insurance Policies might BOA contend provide it with Coverage for these settlements or, in the event any such claims actually go to judgment, for judgments in cases presenting these claims?

2.  Aside from the question of Insurance Policies, what sort of "cover" has BOA undoubtedly arranged for these payments -- and who is really at risk to pay them?

Please Read The Disclaimer.

 

  

MORE: Federal Immunity for Foreclosure False Swearing?

   As is now generally known, Foreclosure False Swearing in Lawsuits has caused a crisis in Mortgage Insurance and in Title Insurance both.  See the many recent previous posts here in particular under the Categories of Mortgage Insurance and Title Insurance.

   Apropos of proposals for Federal Immunity for Foreclosure False Swearing:

   The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior.  But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code.  A challenge on constitutional grounds would be inevitable.

   Asking for Congress's help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings.  Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?

Yves Smith, "How the Banks Put the Economy Underwater" p. 9, col. 1 (New York Times "Week In Review" Section, Sunday, October 31, 2010).

   Anybody else care to answer that last question?

   I will try for an answer:  "Heck, yes."  Expect a bill or bills to be introduced in the U.S. House of Representatives this week, tabled by the current majority, and passed by the majority to come in January, 2011.

 Please Read The Disclaimer.

UPDATE ON OUR PREVIOUS POSTS on Residential Mortgage ...

  ... Foreclosure False Swearing Issues.  Our Previous Posts can be accessed primarily in the Categories of Foreclosures, Mortgage Insurance and Title Insurance.  Some Previous Posts are also archived under Deceptive and Unfair Practices Acts, Fraud and Misrepresentation, and Market Performance.

    Not to be left out, Rolling Stone magazine just released an article on what the reporter clearly sees as the ill effects of Foreclosure Frauds by some Plaintiff Lenders and Mortgage Servicers, or perhaps as the ill effects of Foreclosure Lawsuit Systems as inherent Frauds, by Matt Taibbi, "Courts Helping Banks Screw Over Homeowners" (Rolling Stone Online, November 10, 2010; print publication issue November 25, 2010).

Please Read The Disclaimer.

MORE on "Force-Placed" Insurance by Lenders and Mortgage Servicers.

   This updates the discussion in a series of posts here of False Swearing and other practices apparently indulged by some Foreclosure Plaintiffs, most recently on Wednesday, November 10, 2010.

   The selection of "force-placed" Insurance, with Premiums to be paid by Borrowers in amounts added to their Mortgage Payments, is under scrutiny according to recent reports.  Mortgage Servicers and their Insurance subsidiaries which are funneled the business, are of particular concern to some observers.  "With little regulatory oversight or even private investor awareness, force-placed insurance has helped make drawn-out foreclosures lucrative for servicers -- far more so, in some cases, than helping a borrower return to performing status.  As the intermediary between borrower and investor, servicers appear to be benefiting themselves at the expense of both."  See Jeff Horwitz, "Ties to Insurers Could Land Mortgage Servicers in More Trouble" (American Banker, Wednesday, November 10, 2010).

Please Read The Disclaimer.

MORE ABOUT Fraud Upon Courts by Foreclosure PLAINTIFFS, Insurance Crisis.

"I'm very concerned about activity by some I read about that go to the integrity of the system.  But we're tied to (ruling on) what comes before us in a case.  And if no one is there to say it's not true, we're in a tough position."  Honorable J. Thomas McGrady, Florida Circuit Court Judge, quoted by Kris Hundley, "Judge:  Foreclosure Cases Starting to Clog the System" (St. Petersburg Times Online, Friday, November 5, 2010).

This post continues from posts which began on Sunday, October 31, 2010  and continued on Monday, November 1, 2010 and on Wednesday, November 3, 2010.

.

   Another Congressional Response:  Immunize All Foreclosure Plaintiffs Who Have Filed False Affidavits.

   Congress is reportedly likely to confront proposed Bills to immunize all Foreclosure Plaintiffs who have filed false affidavits and otherwise sworn falsely in Foreclosure Lawsuits.  Whether the Bills pass or not is open to question, apparently.  See Marketplace on Public Radio, "Weekly Wrap:  What Lies Ahead" (Friday, October 29, 2010) .

   The immunity would presumably extend to subrogation suits filed by Mortgage Insurance Companies who are going broke paying for defaulting Mortgagors (i.e., for the Defendants in the Foreclosure Suits) but who do or may have remedies available as a result of the false Affidavits filed in Court.  See, e.g., Dakin Campbell, "Genworth's Profit Misses Analysts' Estimates on Mortgage-Insurance Losses" (Bloomberg.com, Thursday, October 28, 2010)( "Mortgage insurers, which pay lenders when homeowners default and foreclosures fail to recoup costs, have lost money over the past three years because of the surge in soured loans."); Michael Powell, "Owners Seek to Sell at a Loss, But Bankers Push Foreclosure" p. A1, col. 2 (New York Times Nat'l ed., Monday, October 25, 2010)("And lenders can try to collect on private mortgage insurance.").

   Parenthetically, in some cases Mortgage Insurance Premiums lead to Foreclosure Suits because they are too high to pay when they are the result of "force-placed" Insurance, i.e., forced by the Lender.  See Gary Blankenship, "Sloppy Paperwork Exacerbates the Foreclosure Crisis/'People Weren't Paying Attention to the Paperwork, and They are Trying to Fix it During the Foreclosure Process'" p.1, col. 1 (Florida Bar News, October 15, 2010)("Lenders require that owners maintain insurance.  But if an error accidentally lets that insurance lapse for a few days, the lender can bring in an insurer, with the premiums passed to the owner.").

   The proposed immunity would also presumably extend to bar recoupment suits by those Title Insurance Companies which have issued Title Insurance Policies to people who bought Foreclosure homes.  The state of the title on many Foreclosure homes now is or may be questionable.  Title questions on Foreclosed homes are likely subject to legal actions and other expense incurred by the Title Insurance Companies to clear the title.  See, e.g., Andrew Martin and David Streitfeld, "Halt in Foreclosures a New Blow to Home Sales" p. A1, col. 3 (New York Times Nat'l ed., Friday, October 8, 2010); Anjali Fluker, "Foreclosure Halt Stymies Local Realtors, Investors" p. 1, col. 4 (Orlando Business Journal, Oct. 15-21, 2010).

   In fact, at least some Title Insurance Companies have stopped issuing Title Insurance for these very reasons.  David Streitfeld, "Document Flaws Have Put Brakes on Foreclosures" p. A1, col. 6 (New York Times Nat'l ed., Friday, October 1, 2010).

   Like Mortgage Insurance Companies, Title Insurance Companies are also losing money as a result of the many lenders' Foreclosure Lawsuits.  See Kathleen M. Howley, "Foreclosure Errors Cloud Homeownership With 'Blighted Titles'" (Bloomberg.com, Friday, October 1, 2010)("The costs for title insurers to defend customers and reimburse for lost properties rose 14 percent to $480.5 million in 2010's first half from a year earlier ....").

   CONCLUSION:

Some people have a right to swear falsely and submit false Affidavits, if we let them.  But they have no right to call their False Swearing the Truth.

   There is a crisis.  It is a crisis of False Swearing, part of a business model fueled by cash and ways to generate more. 

   It has within it the potential of Fraud and the certainty of greed.

   The Judicial System is in question because of numbers.  Foreclosure Plaintiffs have filed so many Lawsuits that the basis for these Lawsuits is often disregarded, including who is the proper Plaintiff and who has the Note and who holds the Mortgage.  There is no question that the owners are most often in default.  The questions come because of the conduct of the Foreclosure Plaintiffs.  There are few questions caused by the conduct of the Foreclosure Defendants.

   "It's not the money, stupid."  "It's the Justice," far more than money or the pursuit of money.

   Time will tell whether the litigious Foreclosure Plaintiffs, with great wealth and plans to make more, will be allowed to overwhelm the Court System with False Swearing as a way of doing business, and be immunized in all Foreclosures from the consequences of their conduct in litigating some Foreclosures.  Or whether they will face the consequences of False Swearing, just as other Plaintiffs in past cases have faced the consequences of False Swearing.

   To say again, Time will Tell.  In the meantime, Mortgage Insurance Companies and Title Insurers are going broke, they are being sued by the litigious Foreclosure Plaintiffs, and the Judicial System is under attack.

   The outcome is not certain.

Please Read The Disclaimer.

   

 

"Fraud Upon the Courts?" Insurance Crisis Result of False Swearing.

   Third in a series:

This post continues from posts which began on Sunday, October 31, 2010  and continued on Monday, November 1, 2010.

   Some people have a right to swear falsely and submit false Affidavits, if we let them.  But they have no right to call their False Swearing the Truth.

   There are so many Foreclosure Lawsuits that the sheer number of them overwhelmed the abilities of the people and organizations responsible for filing them.  There is a current Crisis in False Swearing as a result.  Affidavits have apparently been filed in many Foreclosure Lawsuits in an effort to obtain Summary Judgments without Trial, because many Plaintiffs cannot prove their Foreclosure Cases if they have to go to Trial.  "The foreclosure machinery that has forced millions of Americans out of their homes is beginning to seize up as some lenders and their lawyers are accused of cutting corners in their pursuit of rapid home repossessions."  David Streitfeld, "Document Flaws Have Put Brakes on Foreclosures/Focus on Cut Corners" p. A1, col. 6 (New York Times Nat'l ed., Friday, October 1, 2010).

   The effects have been felt by Title Insurance Companies, for example, which have refused to issue Title Insurance to cover title to properties foreclosed on by certain mortgage servicers and lenders who are suspected of filing false Affidavits in Foreclosure Lawsuits.  See id.  As one report put it:

   The missteps stemmed from the affidavits the lenders file as they seek a quick or summary judgment in thousands of foreclosure cases.  The affidavits state certain facts about the case, including the amount owed, which the signer indicates [actually, testifies] he has personal knowledge of.  Without the affidavit, the lender would have to prove the facts at trial.

Id.

REMEDIES FOR THE FALSE FORECLOSURE AFFIDAVITS "CRISIS".

   First, there is no "crisis" at all. There are apparently some litigious Foreclosure Plaintiffs who are willing to lie under oath in order to make money.

   So what is new?  "'The whole essence of this crisis is fraud and unless we restore the rule of law and transparency of disclosure, we are not going to fix this.'"  Professor Laurence J. Kotlikoff, quoted by Gretchen Morgenson, "Fair Game/One Mess That Can't Be Papered Over" p. 1, col. 2 (New York Times Nat'l ed., "SundayBusiness" Section, Sunday, October 24, 2010).

   This is not the first time that people may have lied under oath.  If it can be proved that they did, they are subject to the same consequences as any other person previously proven to have lied under oath.  See Gretchen Morgenson, "Banks' Flawed Paperwork Throws Some Foreclosures Into Chaos" p. A1, col. 3 (New York Times Nat'l ed., Monday, October 4, 2010), quoting Linda M. Tirelli, Esquire:  "'This is not about getting a free house for my client.  It's about getting a level playing field.  If I submitted false documents like this to the court, I'd have my license handed to me.'"

   Fifty (50) State Attorneys General are jointly investigating whether the False-Swearing-Affidavits-in-Foreclosures procedure is an unfair and deceptive trade practice by Lenders and Mortgage Servicers in their States' Courts.  If this business practice exists of backing up Foreclosure Cases with false testimony, they vow to take appropriate action to prevent it.  See National Association of Attorneys General Press Release, "50 States Sign Mortgage Foreclosure Joint Statement," October 13, 2010.  Parenthetically, the Federal-State prosecutor relationship is reportedly frayed past the point of forbearance due to the Feds favoring the Banks.  See Joe Nocera, "Talking Business/The States Take on Foreclosures" (New York Times Online Friday, October 29, 2010).

PREVIOUS FEDERAL RESPONSES TO FORGIVE THE FRAUD; DEAD ON ARRIVAL. 

   A Congressman from Texas has reportedly introduced a bill in  many past Sessions of Congress, without success until this year, which would require all States and the District of Columbia to accept Affidavits at the lowest common denominator favored by any one State, which could theoretically include no oath, no personal knowledge, no notary, and so on.  The Bill, as noted, passed Congress this year.  President Obama vetoed it by refusing to sign it while Congress was in recess, a process called a "pocket veto".  See Jackie Calmes and David Streitfeld, "Obama Will Veto Notary Bill That Could Speed Foreclosures" p. B1, col. 1 (New York Times Nat'l ed., "Business Day" Section, Friday, October 8, 2010).

More About Suggestions for a "Fix" For Foreclosure False Swearing "Crisis" to Come, and More to Come on the Insurance Crisis that REALLY is the result of the False Foreclosure Swearing ....

 Please Read The Disclaimer.

  

    

False Swearing: Part of a "Fraud Upon the Court?"

   Some people have a right to file false Affidavits, if we let them.  But they have no right to call their false Affidavits the Truth.

   A witness giving testimony in an Affidavit must ordinarily swear or affirm under Oath.  She or he swears that what's in the Affidavit is the Truth and that it is based on the personal knowledge of the person testifying in the Affidavit.

   Failure to comply with these requirements is not a "procedural defect" or a mere failure to "follow the letter of the law in preparing foreclosure paperwork."  Gary Blankenship, "Sloppy Paperwork Exacerbates the Foreclosure Crisis/'People Weren't Paying Attention to the Paperwork, and They are Trying to Fix it During the Foreclosure Process'" p.1, col. 1 (Florida Bar News, October 15, 2010).  See Press Release, National Association of Attorneys General, "50 States Sign Mortgage Foreclosure Joint Statement," October 13, 2010 (Statement of action based on appearance of "procedural defects" in Mortgage Foreclosure Lawsuits).

   If a person swears to Truth as her or his own personal knowledge, and that is not the Truth, it is a fraud upon the Court.

   A witness giving testimony in an Affidavit must also execute (sign) the Affidavit in front of a Notary, ordinarily.  The Notary is supposed to administer an Oath before the witness signs the Affidavit.  In my own personal experience, some Notaries seem not to know how to do that, or even that they have to.

   No-one disputes, however, that witnesses swearing to Affidavits filed in Foreclosure Lawsuits, were swearing or affirming to the Truth of what was in the Affidavits, even if they did not take an Oath before they signed the Affidavit and even if they said they did.

   An Affidavit is also ordinarily required to be executed in the presence of the Notary.  Existing practice has never accepted notarized signatures from people who signed in other States or at other times when the Notary was not present.  One of the problems that may exist with some Affidavits in some Foreclosure Lawsuits is that witnesses executed Affidavits in different States and otherwise at times when Notaries were not present in some cases.

   If witnesses do not execute their Affidavits in the presence of the Notary, but swear that they do, it is not simply a "technical omission" or simply "shoddy paperwork."  See Gary Blankenship, "Faulty Filings Hamper Clearing Foreclosures" p. 1, col. 4 (Florida Bar News, October 1, 2010).

   In that case, it is a lie.

   The Law's (or perhaps many Trial Lawyers') and the Good Book's treatment of lying are based on the same experience:  Human beings are sometimes reluctant to be honest when being honest stands in the way of personal preferences, such as making money.  Arguably, says the experienced Trial Lawyer, those who cannot be trusted in small things, cannot be trusted in large ones.

   If swearing or affirming the Truth of testimony is a "small thing," then that witness is likely not to be trusted in larger things, such as:

   That a Note or other document necessary to proceed with the Foreclosure on a person's home are somehow "missing," and that the absence of that documentation should be excused accordingly; or

   The identity of the correct Plaintiff in the Foreclosure Lawsuit; or

   The correct amount owed by the Defendants.  (In some reports, it is to be doubted whether the Defendants are correctly named as Defendants at all; in some cases, reportedly, Foreclosure Lawsuits have been filed against Homeowners who are either current in their Mortgage payments, or who do not even have a Mortgage.)

To be continued including regarding the Effects of False Swearing on Title Insurance, Mortgage Insurance, and the Court System ....

Please Read The Disclaimer.

 

 

Halloween Treat in Florida: "No Tricks From You!"

   In a new and interesting decision, a Florida Appellate Court has pulled together various strands of settled Florida Law this Halloween.

   In Florida, the Plaintiff in a Foreclosure Lawsuit must present evidence, either in proper support of its Motion for Summary Judgment or at the Trial of the case, that it owns and holds the note and mortgage in question.  Its proof must consist either of a "tender [of] the original promissory note," or of proof that will successfully  reestablish a lost note as provided by the Florida Statutes.

   In addition, if the note does not identify the Plaintiff as the party to be paid on it, then it must either "bear a special indorsement" naming the Plaintiff, or a blank indorsement.  The Plaintiff may, in the alternative, submit proper evidence of either (1) the true payee's assignment to the Plaintiff of proceeds payable under the note, or (2) "an affidavit of ownership," in order to prove that it, the Plaintiff, holds the note.

    This is pretty basic.  These settled rules of Florida Law were recently applied in time for Halloween in the case of Servedio v. US Bank Nat'l Ass'n, Download Servedio v. US Bank National Association (Fla. 4th DCA Case No. 4D10.1898, Opinon Filed October 27, 2010)(PUBLIC ACCESS; STATED NOT FINAL), also published as 35 Fla. L.W. D2368a (Fla. 4th DCA October 27, 2010)(Subscription required to access Florida Law Weekly).  After applying these rules of Law, the Court in this Halloween treat (no tricks, please) held on the facts of record in that particular matter:

The record on appeal does not contain the original note, evidence of an assignment of the mortgage and note to appellee, or an affidavit of ownership by appellee. Appellee filed no other admissible “pleadings, depositions, answers to interrogatories, admissions, affidavits, and other materials” to support its contention that it owns and holds the note and mortgage. Fla. R. Civ. P. 1.510(c). “[I]t is apodictic that summary judgments may not be granted . . . absent the existence” of admissible evidence in the record. TRG-Brickell Point NE, Ltd v. Wajsblat, 34 So. 3d 53, 55 (Fla. 3d DCA 2010). Without evidence demonstrating appellee's status as holder and owner of the note and mortgage, genuine issues of material fact remain, and summary judgment was improper.

[Emphasis added electronically on Halloween.}

The devastatingly bad effects on Mortgage Insurance and on Title Insurance, of shorting these established Rules of Law, are explored in continuing posts over the next several days.

Please Read The Disclaimer.

UPDATE MEDIATOR INFORMATION: Residential Mortgage Foreclosure Mediations: Wealthy Strategic Defaults.

   This post provides newly received information in an Update of the post here on Mediation of Residential Mortgage Foreclosures and the information available on the role of strategic defaults, on Wednesday, July 7, 2010.

"The rich are different; they are more ruthless."

Sam Khater, Senior Economist at Core Logic, quoted by David Streitfeld, "Biggest Defaulters on Mortgages Are The Rich" p. A1, col. 3 (New York Times Nat'l ed., Friday, July 9, 2010).

   Any concern with so-called "strategic defaults" needs to take this statistic into account to be realistic:

   Homeowners with Million Dollar Mortgages, of which there are apparently quite a few, plan and act out their strategic defaults at a rate of about 2-to-1 compared to people who owe lesser amounts of money on their mortgaged homes.

   It appears that these "wealthier" Homeowners are not deterred by accusations of moral depravity or by threats that the Lender will pursue them for the amount they owe beyond the value of the house the Homeowners leave behind in their strategic defaults.  See David Streitfeld, "Biggest Defaulters on Mortgages Are The Rich" p. A1, col. 3 (New York Times Nat'l ed., Friday, July 9, 2010).

   These are things which Mediators need to be aware of, before attempting to conduct successful Mediations of Residential Mortgage Foreclosures in such cases.

Please Read The Disclaimer. 

Mediation of Florida Residential Mortgage Foreclosures Taking Effect.

   Mediation of Florida Residential Mortgage Foreclosures is taking effect.  In some Florida Counties, such as Pinellas and Pasco, mandatory Mediation is already in effect for Homesteads, i.e., where the Homeowner lives in the home.  See Editorial, "New Foreclosure Mediation Program is Win-Win For Homeowners, Taxpayers" (St. Petersburg Times Online, Friday, July 2, 2010).

   As Lenders increasingly take possession of more and more Foreclosed Properties which simply cannot be sold, nor sold at anything like the vanished balance of the Foreclosed Mortgage, the price seems to be rising for so-called "strategic defaults," or defaults planned by the Borrower who owes more on the Mortgage than the Property is worth.  Mediators in Residential Mortgage Foreclosure cases in any State or other jurisdiction will want to have available perhaps a list of resources for uninformed Borrowers who may think that they do not face any downside risk other than impairing their Credit.  The price now includes not only impaired Credit, but "[t]he lender could sue you for the balances you owe....  You may want to talk to an attorney familiar with debtor protection in you state (a bankruptcy attorney might be a good choice) to get an assessment of your risk."  Liz Pulliam Weston, "What Landlords Risk by Abandoning Mortgages" (latimes.com, Sunday, July 4, 2010).  See also Adam Geller, Associated Press copyrighted story, "Finding Gold in Them Thar Foreclosures" (Washington Post Online, Sunday, July 4, 2010).

   "Homeowners in volatile boom-and-bust states such as California and Florida have been especially prone to walk away from deeply negative equity situations."  Kenneth R. Harney, "Lenders' Focus Turns to Strategic Defaults" (latimes.com, Sunday, July 4, 2010).  This linked report mentions a couple of results of a study funded by the Federal Reserve Board that we already knew, but here they are:

1.  Strategic defaults have geographic implications, meaning that there apparently tend to be a greater number of strategic defaults in places like "California and Arizona, where state law limits lenders' ability to collect post-foreclosure deficiencies on principal residence mortgages," unlike other states "such as Florida and Nevada, where lenders face fewer restrictions."  Id.  It is not reported how this finding squares with the fact that Florida has one of the greatest numbers of strategic defaults, but there you are.

   The highly paid Fed researchers conclude from this that "'borrowers may factor into the costs of default the potential legal liabilities resulting from a foreclosure.'"  Id.  [Emphasis added.]  In other words, Borrowers contemplating not paying off a Mortgage balance that is far greater than a house is worth, may know that they live in a State that affords them certain protections if the Lenders come after them for more than the house.  Duh!

2.  "The Fed researchers [also] concluded that the depth of borrowers' negative equity positions is an important tripwire to their decision to send back the keys."  Id.  "The more people owe, the more they are likely to walk away," is not a revelation.  Let alone one to pay Taxpayer money for.

Mediators in Residential Mortgage Foreclosures will be sure to want to know these things for a good and productive Mediation.

P.S.

Residential Mortgage Foreclosure lawsuits have apparently had little or no effect on luxury vacation housing projects, however.  "Walt Disney Co. this morning [June 23, 2010] officially unveils its plans to begin building luxury vacation homes on its land near its Orlando theme parks."  Robert Trigaux, Venture Blog on St. Petersburg Times web site, post of June 23, 2010 entitled, "High Risk (Or Insanity) Lurking in Orlando's Luxury and Stratospheric Housing Markets?"

Please Read The Disclaimer.

  

 

More Knowledge Tools for Residential Mortgage Foreclosure Mediations.

   In a report released by the Federal Reserve Bank, a "home ownership gap" is explained and explored.  And a new term is coined.  Knowledge of this gap is important for Mediators and all parties and their Counsel in Residential Mortgage Foreclosure Mediations.

  The "home ownership gap" is explained as the gap that remains after subtracting the percentage of homeowners who owe more on their mortgages than their home is worth ("homeowners under water"), from the official percentage of home ownership in a given locale according to statistics released by the Federal Reserve Board.  The percentage of homeowners under water comes from the Case-Shiller Home Price Index.

   Some home ownership gap figures using this measure:

Tampa Bay:

   67.6% official Federal Reserve Board home ownership rate.

  -51.2% homeowners under water

 = 16.4% home ownership gap.

Miami:

   22.5% home ownership gap.

And then, there is the home ownership gap in Las Vegas, Nevada, after this mechanism is used:

   43.9%.

 

The FRB report also contains this description of homeowners under water: "renters in waiting".  If home ownership gaps are in such high percentages, can Residential Mortgage Foreclosures and Mortgage Insurance Claims be far behind?  They seem to be results that should be anticipated after looking at these measures.

The phenomena of "home ownership gaps" are explored in an informative and thought-provoking post on "Ventures Blog" published by the St. Petersburg Times Online on Friday, June 11, 2010,  written by Robert Trigaux.

Please Read The Disclaimer.

Florida Residential Mortgage Foreclosure Mediation is No "Whim".

This is an update to previous posts here regarding Residential Mortgage Foreclosure Mediations, most recently on April 15, 2010,  March 25, 2010 and  March 26, 2010.

   Results are disheartening from the Administration's attempts to arrange voluntarily modified mortgages, and so reduce the number of defaults and Foreclosures.  See David Streitfeld, ""Failures Up In Modified Mortgages" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Thursday, April 15, 2010).

   "Principal" reduction is apparently not going to be a tool volunteered by mortgage servicers and investors.  They may not have either the authority or the stimulus to resolve mortgage defaults by anything less than Foreclosure.  In fact, one of their reporters has described principal reduction itself not as an option, but as a "whim":

   The notion of cutting principal, however, has already run into some resistance from the big banks, which do not want borrowers to get the idea that their mortgage can be chopped on a whim.

Streitfeld, April 15, 2010 New York Times, supra.

   If borrowers took the position, which they have not taken, that principal repayment is a "whim," that could be described as foolish, for one thing.  It would certainly be counterproductive to any resolution short of a Foreclosure contest, as well.

   Florida now requires Residential Mortgage Foreclosure Mediations in virtually all Residential Mortgage Foreclosure actions filed in the State.  If Mediation is to have any hope of success in resolving these mortgage disputes, and not merely delaying their resolution by costly Foreclosure contests, more than moonbeam "whims" will be required of the parties who sit at the negotiating table.

Please Read The Disclaimer.

Residential Mortgage Foreclosure Mediations May not Include Principal Reduction Option ...

...After All.  This is an update to previous posts here regarding Residential Mortgage Foreclosure Mediations, most recently on March 25, 2010 and  March 26, 2010.

   Not long ago, perhaps a matter of three weeks at the most, Bank representatives were quoted as speaking with the authority of their Banks, that the Banks are now willing to consider reducing the principal on residential mortgages that are in Foreclosure.

   Not so now, say two testifying representatives of the Banks, one from JP Morgan Chase and one from Wells Fargo.  They told the House Financial Services Committee, under oath, that their Banks will not consider reducing principal after all.  Their "investors" will not let them, for one thing.  It would not be good for the country, for another thing.  See David Streitfeld, "Banks Resist Plans to Cut Mortgages" p. B1, col. 6 (New York Times Nat'l ed., "Business Day" Section, Wednesday, April 14, 2010).

   Please.  If the Banks will not reduce the amount due on their mortgage loans once they have the borrowers' signatures, that is their choice.  But spare us the lectures about morality, something about which the Big Banks clearly know so little.

   In the interim, will Mortgage Insurance Policies be called upon to satisfy the Banks which hold unpaid and perhaps never-to-be-paid Mortgages?

Please Read The Disclaimer.

Federal Government to Propose Reformation of Residential Mortgage Foreclosure Modification.

   **Author's Note:  If you have reached this blog through a list that carries advertising, your computer may or may not be put at risk either through the list or through the advertising.  I do not accept or authorize any commercial advertising of any kind on any list or post.  Placing commercial advertisements with or near any of my web log posts is prohibited.  Further, I do not recommend any products or services advertised with or near any of my posts or any list of my posts.** 

   The Obama Administration, in orders to the Treasury Department, is poised to propose reforming Residential Mortgage Foreclosure Modification on the day of this post.  Further developments will be posted here after they happen.

   In a press conference scheduled for later on this morning of Friday, March 26, 2010, unnamed individuals employed in the "Obama administration" reportedly will announce three (3) legislative or regulatory proposals:

1.  "Encourage" Lenders to reduce principal on certain Residential Mortgages.

2.  Authorize the Federal Housing Administration to refinance "loans from borrowers whose home's [sic] value has sunk below what they owe on it," i.e., to refinance loans previously secured by borrowers with mortgages on houses in which they are "underwater" or owe more than the house is worth.  This proposal would be extended even to homeowners who have not fallen behind in their mortgage payments.

3.  Require Lenders to "offer" unemployed Borrowers reductions in their payments "for a minimum of three months."

See David Streitfeld, "A Big Expansion is Planned in Aid to Homeowners/Fighting Foreclosures" p. A1, col. 6 (New York Times Nat'l ed., Friday, March 26, 2010).

   So far these proposals seem to be talk.  It is not clear whether they depend on legislative enactment, regulation overhaul, or both.  Until approved and enacted, these proposals are moonbeams in the hand, there is really nothing there at all:  Except hope. 

   When these changes are made, I will post them here.

Please Read The Disclaimer.