Foreclosures Judge grapples with her discovery of 15,000 unserved foreclosure cases

June 24, 2009	By: Billy Shields

Miami-Dade Circuit Court judge discovered more than 15,000 foreclosure cases filed this year haven’t been served. It’s the latest shoe to drop in a foreclosure crisis garnering nationwide attention, and an unwelcome discovery in the face of state budget cuts that produced layoffs for courts and clerks. The backlog is critical because cases where homeowners haven’t been served within four months are subject to dismissal. Civil Division Administrative Judge Jennifer D. Bailey made the discovery last month as she was taking stock of the circuit’s foreclosure load. She noticed 15,219 cases with no letters of correspondence, no answers and no motions to dismiss. “In other words, no service,” she said. The circuit is scrambling to find the root of the problem, which could jeopardize most of this year’s 17,000 foreclosure filings. Most of the cases still fall within the four-month window, but no program is in place to speed things up. If a foreclosure proceeds to a default judgment with no service on the defendants, it could lead to a title dispute down the road. Bailey said there is no sign that has happened so far but recognizes the potential for problems. The circuit adopted a foreclosure mediation program for owner-occupied properties through the nonprofit Collins Center for Public Policy in Tallahassee on May 1. As the fledgling program moved forward, lenders argued the center should start contacting borrowers after they’ve been served, said Collins Center president Rod Petrey. But Florida circuits don’t keep statistics on foreclosure service, which is why Bailey requested the statistics last month. “There’s no feedback loop that circles back to the court, and we were not able to wait,” Petrey said. The center contacts defendants in foreclosure after lawsuits are filed; it has received 1,689 Miami-Dade cases since May 1. Petrey was at a loss to say why foreclosure service is so difficult. Some, like Charles Taylor, president of Metro Process Servers in Miami, think the problem is on the clerks’ end. “I don’t think the bottleneck is in service. I believe the bottleneck is that they’re not equipped to handle this stuff,” he said. The crushing volume of foreclosures combined with clerk layoffs conspired to swamp the system. Home abandonment plays a factor in failed service, but the rate of home abandonment in foreclosure cases hasn’t been calculated. “No one really keeps those statistics,” said Alex Sanchez, president of the Florida Bankers Association in Tallahassee. “You would have to call every FDIC-insured institution and every non-bank” to get it. Fort Lauderdale foreclosure defense attorney Morton Antman, says the problem is that lenders and process servers don’t have the resources to pursue every foreclosure properly, and mistakes are made along the way. In Antman’s mind, volume is a factor, but chasing residents who don’t want to be found is a persistent problem. “The primary issue is that most of these people leave their house,” he said. “They just vanish, and how do you make service on these people? Constructive service is a lengthy process.” And the high number of South Florida investment properties in foreclosure with absentee landlords further complicates service problems, said Marc Ben-Ezra, a Fort Lauderdale partner with Ben-Ezra & Katz, who represents lenders. “A lot of people are making it difficult for the plaintiffs to serve them, or in other cases, people have just left the properties,” he said. “The plaintiffs have to do a significant amount of work in order for the plaintiffs to try to find them.” Bailey speculates the problem is procedural. Summonses are issued by clerks after a lawyer files a foreclosure action and sent to process servers for service, which can take up to five business days. The proof-of-service materials then get sent back to lawyers as process servers serve the parties.     “Obviously, those numbers are staggering. Maybe their own internal systems are not able to keep up,” said Richard Burton, a Miami attorney who launched a pro bono foreclosure-defense project. But the scope of the foreclosure service problems could be much worse than the 15,000 cases without service that Bailey discovered. Some foreclosure lawyers question whether there are more cases where service hasn’t been done, but court records show the defendants have been served. Take a foreclosure case filed by Indymac Federal Bank against Ahron and Amitza Benvenisti, who bought a North Miami Beach condo for $177,938 in January 2006. Indymac attempted to serve the husband through constructive service — or service by publication without actual notice — and the wife through a relative in Massapequa, N.Y. The lender moved for a default judgment against the couple. Antman, who represented the couple, argued the process server contradicted himself by checking boxes stating he successfully served the wife through the relative, though Amitza Benvenisti doesn’t live at the relative’s address. The relative, Gilan Benvenisti, swore in an affidavit that she doesn’t live with him. A docket entry dated Monday said the clerk’s office was not authorized to enter a default because of a lack of service. “I don’t know if this was intentional or not, but this isn’t the first time we’ve had situations where process servers do stuff like this,” Antman said. “I think it’s a mistake.” Ron Rice Jr., a Plantation attorney with Kahane & Associates who represented Indymac, did not return calls seeking comment by deadline. Bailey said she still is trying to interpret the data to determine the source of the problem and chart a new course. But whoever is at fault, Bailey quickly notes the problem threatens to overwhelm a court system that already is strapped. “The question I now face is what do I do with this?” she asked. The cases “would potentially be subject to dismissal,” but she noted many cases are recent enough that service within the four-month window is still possible. “Let’s assume a third of these are subject to dismissal. In my spare time, I’ve got to figure out ways to generate orders in 5,000 cases and pay for 5,000 stamps and serve everyone,” Bailey said. “Are we going to do that? Yes. Am I trying to figure it out? Yes.” “It all starts with service. If people don’t get served, all we’re doing is buying ourselves a bunch of title cases in six years,” the judge said. Billy Shields can be reached at (305) 347-6649. Jennifer Bailey photo by A.M. Holt

FDCPA — Fair Debt Collection Practices Act

Fair Debt Collection Practices Act

Don’t get misled by titles. The wording of the statute clearly uses “verification” not validation. Verification generally means some sworn document or affidavit. This means when you contest the debt under FDCPA (in addition to sending a QWR) the party who is supposedly collecting or enforcing the debt has a duty to “obtain verification”. And that means they can’t verify it themselves unless they are the actual lender. And the statutes says pretty clearly that they must give the lenders name and contact information — past and present. STRATEGY: IF THEY SUPPLY SUCH A DOCUMENT, PICK UP THE PHONE AND SPEAK WITH THE PERSON WHO SIGNED IT.I CAN PRACTICALLY GUARANTEE THEY WILL DISCLAIM EVERYTHING THAT WAS IN IT AND POSSIBLY EVEN THAT THEY SIGNED IT.

15 U.S.C. 1692 ———–

FDCPA

Salient provisions affecting foreclosures:

§ 1692. Congressional findings and declaration of purpose

Abusive practices

There is abundant evidence of the use of abusive, deceptive, and unfair debt collection practices by many debt collectors. Abusive debt collection practices contribute to the number of personal bankruptcies, to marital instability, to the loss of jobs, and to invasions of individual privacy.
(b) Inadequacy of laws
Existing laws and procedures for redressing these injuries are inadequate to protect consumers.

(4) The term “creditor” means any person who offers or extends credit creating a debt or to whom a debt is owed, but such term does not include any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.
(5) The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.
The term “debt collector” means any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another. Notwithstanding the exclusion provided by clause (F) of the last sentence of this paragraph, the term includes any creditor who, in the process of collecting his own debts, uses any name other than his own which would indicate that a third person is collecting or attempting to collect such debts.

§ 1692g. Validation of debts

(a) Notice of debt; contents
Within five days after the initial communication with a consumer in connection with the collection of any debt, a debt collector shall, unless the following information is contained in the initial communication or the consumer has paid the debt, send the consumer a written notice containing—
(1) the amount of the debt;
(2) the name of the creditor to whom the debt is owed;
(3) a statement that unless the consumer, within thirty days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the debt collector;
(4) a statement that if the consumer notifies the debt collector in writing within the thirty-day period that the debt, or any portion thereof, is disputed, the debt collector will obtain verification of the debt or a copy of a judgment against the consumer and a copy of such verification or judgment will be mailed to the consumer by the debt collector; and
(5) a statement that, upon the consumer’s written request within the thirty-day period, the debt collector will provide the consumer with the name and address of the original creditor, if different from the current creditor.
(b) Disputed debts
If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) of this section that the debt, or any portion thereof, is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or a copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector. Collection activities and communications that do not otherwise violate this subchapter may continue during the 30-day period referred to in subsection (a) unless the consumer has notified the debt collector in writing that the debt, or any portion of the debt, is disputed or that the consumer requests the name and address of the original creditor. Any collection activities and communication during the 30-day period may not overshadow or be inconsistent with the disclosure of the consumer’s right to dispute the debt or request the name and address of the original creditor.
(c) Admission of liability
The failure of a consumer to dispute the validity of a debt under this section may not be construed by any court as an admission of liability by the consumer.
(d) Legal pleadings
A communication in the form of a formal pleading in a civil action shall not be treated as an initial communication for purposes of subsection (a).
§ 1692j. Furnishing certain deceptive forms

(a) It is unlawful to design, compile, and furnish any form knowing that such form would be used to create the false belief in a consumer that a person other than the creditor of such consumer is participating in the collection of or in an attempt to collect a debt such consumer allegedly owes such creditor, when in fact such person is not so participating.
Any person who violates this section shall be liable to the same extent and in the same manner as a debt collector is liable under section 1692k of this title for failure to comply with a provision of this subchapter.

§ 1692k. Civil liability

(a) Amount of damages
Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—
(1) any actual damage sustained by such person as a result of such failure;
(2)
(A) in the case of any action by an individual, such additional damages as the court may allow, but not exceeding $1,000; or
(B) in the case of a class action, (i) such amount for each named plaintiff as could be recovered under subparagraph (A), and (ii) such amount as the court may allow for all other class members, without regard to a minimum individual recovery, not to exceed the lesser of $500,000 or 1 per centum of the net worth of the debt collector; and
(3) in the case of any successful action to enforce the foregoing liability, the costs of the action, together with a reasonable attorney’s fee as determined by the court. On a finding by the court that an action under this section was brought in bad faith and for the purpose of harassment, the court may award to the defendant attorney’s fees reasonable in relation to the work expended and costs.
(b) Factors considered by court
In determining the amount of liability in any action under subsection (a) of this section, the court shall consider, among other relevant factors—
(1) in any individual action under subsection (a)(2)(A) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, and the extent to which such noncompliance was intentional; or
(2) in any class action under subsection (a)(2)(B) of this section, the frequency and persistence of noncompliance by the debt collector, the nature of such noncompliance, the resources of the debt collector, the number of persons adversely affected, and the extent to which the debt collector’s noncompliance was intentional.
(c) Intent
A debt collector may not be held liable in any action brought under this subchapter if the debt collector shows by a preponderance of evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid any such error.
(d) Jurisdiction
An action to enforce any liability created by this subchapter may be brought in any appropriate United States district court without regard to the amount in controversy, or in any other court of competent jurisdiction, within one year from the date on which the violation occurs.
(e) Advisory opinions of Commission
No provision of this section imposing any liability shall apply to any act done or omitted in good faith in conformity with any advisory opinion of the Commission, notwithstanding that after such act or omission has occurred, such opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

§ 1692n. Relation to State laws

This subchapter does not annul, alter, or affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to debt collection practices, except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency. For purposes of this section, a State law is not inconsistent with this subchapter if the protection such law affords any consumer is greater than the protection provided by this subchapter.

§ 1692o. Exemption for State regulation

The Commission shall by regulation exempt from the requirements of this subchapter any class of debt collection practices within any State if the Commission determines that under the law of that State that class of debt collection practices is subject to requirements substantially similar to those imposed by this subchapter, and that there is adequate provision for enforcement.

OHIO SLAM DUNK by Judge Morgenstern-Clarren: US BANK TRUSTEE and OCWEN Crash and Burn

OHIO SLAM DUNK by Judge Morgenstern-Clarren: US BANK TRUSTEE and OCWEN Crash and Burn

Pretender Lenders — read and weep. Game Over. Over the next 6-12 months the entire foreclosure mess is going to be turned on its head as it becomes apparent to even the most skeptical that the mortgage mess is just that —  a mess. From the time the deed was recorded to the time the assignments, powers of attorneys, notarizations and other documents were fabricated and executed there is an 18 minute Nixonian gap in the record that cannot be cured. Just because you produce documents, however real they appear, does not mean you can shift the burden of proof onto the borrower.

If you say you have a claim, you must prove it. If you say you are the lender, you must prove it.

Bottom Line: Every acquisition of residential real property that was allegedly subject to a securitized mortgage is subject to nullification whether it was by non-judicial foreclosure, judicial foreclosure, short-sale, modification or just a regular sale. Every foreclosure, short-sale or modification is subject to the same fatal flaw. Pension funds are not going to file foreclosure suits even though they are the ones who allegedly own the loans.

Legislators take notice: Just because bankers give you money doesn’t mean they can change 1000 years of common law, statutory law and constitutional law. It just won’t fly. And if you are a legislator looking to get elected or re-elected, your failure to act on what is now an obvious need to clear title and restore the wealth of your citizens who were cheated and defrauded, will be punished by the votes of your constituents.

In_Re_Wells_Bankruptcy_OH_ND_Decision_22_Jun_2009

memo_20090212_Motions for Relief From Stay Update – Endorsement of Note by Alleged Attorney-in-Fact_pmc-2

memo_20080709_Additional Guidance on Motions for Relief From Stay_pmc-1

memo_20080212_Tips for How a Motion for Relief From Stay Can Proceed Smoothly Through the Court _pmc-1

memo_19980824_Motions for Relief From Stay_pmc-1

Debtor Without Lawyer Defeats Motion for Relief from Stay, Based on Lack of Standing

Based on Lack of Standing

Debtor Without Lawyer Defeats Motion for Relief from Stay, Based on Lack of Standing
By Craig Andresen, Minnesota Bankruptcy Attorney on Mar 29, 2009 in Featured, Foreclosure Defense, Mortgage Issues In Bankruptcy, Mortgage Servicer Abuses 

A Washington bankruptcy court recently agreed with a pro se debtor that mortgage servicing agents do not possess legal standing to bring relief from stay motions in chapter 13 cases.

In re Jacobson, 2009 WL 567188 (Bky.W.D.Wash. March 6, 2009), involved a chapter 13 bankruptcy debtor whose mortgage servicing agent filed a motion seeking an order from the bankruptcy court that it could foreclose on the debtor’s home mortgage, based upon lack of payments.  The debtor had a lawyer in the chapter 13 case, but the lawyer made no appearance.  Consequently, the debtor responded to the motion on his own behalf, and argued his case in open court with no lawyer.

The bankruptcy court was concerned that an out-of-state law firm had filed the motion on behalf of the mortgage servicer, but that a lawyer having no formal association with that firm appeared in court to argue the mortgage servicer’s motion.  Henceforth, the court stated, it would hear no arguments from such lawyers, unless a formal notice of association were timely filed.

 

The motion of “UBS AG, as servicing agent for ACT Properties, LLC (”Movant”),” was accompanied by an unauthenticated copy of an adjustable rate note in favor of Castle Point Mortgage, Inc.; and by a “barely legible” copy of a mortgage in favor of Castle Point Mortgage as “lender”; the beneficiary was identified as Mortgage Electronic Registration Systems, Inc. (MERS); and an apparently unrecorded “Assignment of Mortgage” to ACT Properties.  The motion was also supported by a declaration (made in Irvine, California) by a “bankruptcy specialist” that Wells Fargo Document Custody had possession of the note, mortgage, and assignment, in its Minnesota offices.

The court observed that the bankruptcy specialist had incorrectly noted the date the mortgage was signed, missing the actual date by several weeks.  It appeared doubtful the bankruptcy specialist had reliable knowledge of the mortgage or note.

In denying UBS AG’s motion, the bankruptcy court stated that only a “real party in interest” could file a motion in a federal court proceeding.  This was true even if the mortgage servicing agent had the power, granted to it by the owner of the mortgage, to file a bankruptcy court motion.  The court held that relief from stay had to be granted to the owner of the mortgage, and therefore the motion had to be filed by the owner of the mortgage.  It was not acceptable for the servicing agent to file the motion for relief from stay.

Because there was no evidence before the bankruptcy court that UBS AG was the owner of the mortgage note, or that UBS AG had any authority to foreclose the mortgage, UBS AG lacked standing; it was not the real party in interest.  The court ruled that UBS AG was not entitled to an order allowing it to foreclose the mortgage.

Real Consumer Protection: New York Times Gets it Right This Time

Real Consumer Protection

The federal consumer protection system failed the country, disastrously, in the years leading up to the mortgage crisis. One big cause was the sharing of responsibility for compliance with laws and regulations among several agencies that communicate poorly with each other and tend to put the bankers’ interests first and consumer protection second — if they pay attention to it all.

The Obama administration was right on the mark last week when it recognized this problem and proposed a solution: consolidating the far-flung responsibilities into a strong, new agency that focuses directly on consumer protection. The plan, modeled on a bill already introduced in the Senate by Richard Durbin, Democrat of Illinois, deserves broad support in Congress.

Before the current crisis, the lure of big money from Wall Street, which could not get enough of mortgage-backed securities, spread corruption right through the mortgage process. Banks and mortgage companies fed kickbacks to brokers, who often steered borrowers into high-risk, high-cost loans. Appraisers did their part by inflating property values so that people could borrow beyond their means.

Deceptive practices became the order of the day. Borrowers who thought they were getting traditional fixed-rate mortgages sometimes learned at the last minute that they had been given loans with escalating interest rates, exploding payments or complicated structures that they clearly did not understand.

Federal regulators were slow to recognize the rising threat to the economy. They were also vulnerable to “regulatory arbitrage” by the banks, which currently get to choose their own regulators. If one regulator seems too scrupulous, a bank can shift to another and then another, in search of the weakest possible oversight.

Federal regulators may even have accelerated the mortgage crisis by invalidating state laws that would have protected people from misleading and predatory lending practices. By pre-empting those tougher state laws, the regulators helped create an atmosphere in which risky lending practices became the norm.

The new agency envisioned by the Obama administration would put an end to this slippery practice. It would have authority over all banks, credit card companies, other credit-granting businesses and independent, nonbank mortgage companies, which are currently not covered by federal bank regulation.

One of the agency’s principal responsibilities would be to ensure that mortgage documents are clear and easy to understand. Federal rules would serve as a floor, not a ceiling, so that the states could pass even more stringent laws without fear of federal pre-emption. The administration also envisions a data-driven agency that would react swiftly to events like the ones that should have foreshadowed the subprime crisis.

In general, the new agency would require little in the way of new institutional infrastructure. As the administration notes in its proposal, three of the four federal banking agencies have mostly or entirely separated the consumer protection function from the rest of the agency. It would be a relatively simple matter to consolidate those divisions in a new, free-standing agency.

Congress should resist its typical urge to water down this plan for the special interests that write campaign checks but helped precipitate this crisis. Lawmakers need to bear in mind that consumer protection laws don’t just shield individuals. They also protect the economy. That’s a good argument for building a strong, effective consumer protection agency.

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Securitization in A Nutshell

According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

Question: I was served with a complaint to foreclose and of course they lost the note as well as saying I hadn’t paid since November 08. I in fact have paid up until March 31, 09, but it seems they have alloted my mortgage payment (at least 3/4) of them to suspense and fees.

I’ve asked for months to no avail and all the other questions, like who holds my mortgage. I

Are Mortgage servicers allowed to take my payments and apply them to wherever they want, even though I have never seen a notice regarding suspense???

ANSWER: Mary: According to the terms of any note I ever read, any payment from you or any third party that is intended to be a payment against interest, principal or both must be applied as such. You have hit the nail on the head with your question. When they pooled your note, the deal you signed was ended and a new one began — one to which you were NOT a party. You were mentioned but they never got your signature in the pooling and servicing stage, the securitization stage or the terms of the bond (mortgage backed indenture stage).

The “pooling” resulted in giving themselves authority to pledge your payments and third party payments (AIG insurance, credit default swaps, Federal bailouts etc.) to cover the obligation of OTHER BORROWERS. This is a direct breach of the express terms of the note which describes how the payments will be applied.

Follow me here. The “lender” who appeared on the papers at your closing was already prepaid on your obligation by third party investors. So one of two things are true: either the note is paid in full and there is no obligation nor is there anything for the mortgage to secure, or the note you signed was properly assigned to a third party who put up the money. But the note cannot be properly assigned and enforced against you if the terms are changed without your knowledge or consent. So it wasn’t properly assigned. That means it is paid.

Where does that leave the investor who put up the money that was used to fund your mortgage? The investor has received a bond (which is the same as a note) which includes all kinds of terms that you knew nothing about where the money was owed and guaranteed from several entities that you knew nothing about. The bond indenture says the bond holder gets a pro rata title to the mortgages and notes in the pool.

So the “trust” is holding nothing — but so is the investor because the note you signed was not properly assigned — conditions were added to payment and risk, making it a different deal.

So the investor has claims and may have been paid from the government, an insurer, cross collateralization, over collateralization or some other source including you. The investors claims against you are NOT on the note and mortgage because the note was paid never assigned in the legal sense.
The investor’s claims are at common law or in equity since you did get a loan and some of the money the investor injected into the pool was used to fund your loan. But as soon as the investor sues you for unjust enrichment, constructive or resulting trust or whatever, you have counterclaims for all the TILA violation, predatory lending, appraisal fraud, slander of title, usury, etc. that could lead to a counterclaim for treble damages against the investor for things the investor never did — at least not directly.

One thing seems certain — that any claim by the investor is unsecured and the ONLY party with legal standing to assert any claim against you is the one who lost money. The net value of the investor’s claim is unknown but dubious at best. And so far the investors are suing only the servicers and investment banks for sticking them with deals made up of pure vapor.

Due Process, Discovery and Burden of Proof

       Non-judicial process was never intended and could never be constitutionally applied as a mere trick to avoid due process. If these parties wish to initiate foreclosure they must, whether it is a judicial process or a judicial process, possess the attributes of the basic jurisdictional elements of standing and they must possess the attributes of being authorized to proceed by the true parties in interest i.e., the necessary and indispensable parties. The fact that a state allows non-judicial process does not grant carte blanche to any wily person or entity to try its hand at foreclosure and see if they get away with it.

If they are allowed to continue to raise defenses and make allegations without establishing the basic jurisdictional elements of legal standing and without establishing and disclosing the real parties in interest, then the entire case and all foreclosures are a mere charade, inviting any unscrupulous character to attempt to create color of title over the loan and the  foreclose on it.

“How do I prove that?” There are several answers. You know your loan has been securitized but the Judge doesn’t. And even if it has been securitized, how do you show that defeats the foreclosure? In this post I will answer these questions, which appear to be the most asked.

First, do NOT fall through the trap door of taking on the burden of proof. This is trickier in non-judicial states than judicial states but it is still possible to shift the burden of proof onto the pretender lenders if you do the right things and of course, if the Judge agrees with you. Remember these strategies presented here are valid in my judgment — but tactical, strategic and legal considerations by local licensed counsel trump anything I say here.  And for those of you considering class actions, which appear to be popping up all over the country, leave the door open to “fraud on the market.” By its very nature it is ipso facto a class action and eliminates many hurdles.

In all cases, I strongly recommend a forensic review with all four legs of the stool, lest you tip over and fall on your ass. The TILA audit is not only not enough, it is incomplete without considering inflated appraisals, UCC, SEC and chain of title. Without ALL elements present you can’t allege the right things that will enable you to argue that the right to rescind never started running because they withheld the identity of the real lender. Without the securitization information, you can’t allege that the opposing party is a pretender lender. Without the chain of title information you can’t allege that your rescission is effective and that off-record unreported fees and profits were earned. Without the inflated appraisal, you can’t allege that the APR on the good faith estimate is not only wrong, it is fraudulent diverting the borrower’s attention from what is clearly a usurious loan.

And the forensic review process should INCLUDE the debt validation letter (DVL), the  Qualified Written Request (QWR) and probably a notice of rescission under the three-day rule even if the closing was years ago. The good news is that with the QWR there is no restriction on the number of questions you can ask, there is a statutory duty to answer it and you can get a TRO just based upon the fact that RESPA has been invoked.

I strongly advise that you retain a firm with a subscription to ABSnet that renders a separate and independent report on the loans of the specific class representatives so that you can produce, in court, copies of public records documents in the public domain that are subject to judicial notice to create the presumption that these defendants can’t possibly own the note. By doing this, when asked about these specific loans rather than the way things work generally, you can say that these loans definitely did operate in the usual way, that you have copies of the public records to show, and that if the facts are any different it is only because the defendants did not properly report their activities to the SEC or have otherwise failed to answer basic questions of the borrowers like “who is my lender?”

Don’t leave an issue floating which is central to the entire securitization defense and offense: that it isn’t so much whether they will suffer a loss for each foreclosure, but rather that they stand to lose nothing and gain everything. One of the following is true:

1. They don’t own the note and they have no authority to enforce the note or mortgage because they are not named on it and they have not been given express authority by the holders of the the note and mortgage along with indemnification for all costs, expenses, and claims.
2. They don’t own the note and they have authority to enforce the note or mortgage because they have been given express authority by the holders of the the note and mortgage along with indemnification for all costs, expenses, and claims.

Either way they don’t own the note. By definition that is what securitization means. The reason for the procedure invoking limited discovery is to force these parties to either put up or shut up. Non-judicial process was never intended and could never be constitutionally applied as a mere trick to avoid due process. If these parties wish to initiate foreclosure they must, whether it is a judicial process or a judicial process, possess the attributes of the basic jurisdictional elements of standing and they must possess the attributes of being authorized to proceed by the true parties in interest i.e., the necessary and indispensable parties. The fact that a state allows non-judicial process does not grant carte blanche to any wily person or entity to try its hand at foreclosure and see if they get away with it.

Whether you started in non-judicial or judicial forum, you are in court now. The pretender lenders wish to defend the against the borrowers’ claims. They have no standing to defend except as nominal parties unless they can show they have legal standing and that the necessary and indispensable parties are present, disclosed and accounted for in this action. Defendants seek to divert the court’s attention from the most basic elements of due process and fairness when they allege the “loss” they will suffer as “lenders.” They are not lenders. That is the point of the lawsuit. If they are allowed to continue to raise defenses and make allegations without establishing the basic jurisdictional elements of legal standing and without establishing and disclosing the real parties in interest, then the entire case and all foreclosures are a mere charade, inviting any unscrupulous character to attempt to create color of title over the loan and the  foreclose on it.

Each day these defendants (pretender lenders) are allowed to proceed under cover of plausible deniability is another day in which the title of Plaintiffs/Borrowers will be further clouded by further off-record activity that will become on-record when they choose to do so, all in transactions conducted under cloak of secrecy and deception. The situation is bad enough without allowing these defendants (pretender lenders) to make this court complicit in their fraudulent claims, resulting in clouded and unmarketable title.

Wells Fargo Steps on A Rake (We Hope)-a New Country

 And when that rakes hits them in the head, it will hopefully start a domino effect with the rest of the pretender lenders. OH Sup Ct – Wells Fargo Appeal WF has decided to go for the brass ring by bringing an appeal from a case they lost. What they are saying to the Ohio Supreme Court is that if the borrower doesn’t raise the issue of “who owns the loan” early enough, they have waived it. They are also saying that when they finally record the assignment documents should have no effect on who can enforce the note and mortgage. Lastly, and most importantly they are really saying “this is the way we do things now and the courts must conform to industry practice even if it leads to unjust, inequitable, foul results.”All of this would have been considered a bad joke on a law school exam deserving an “F” for failure to have absorbed even the the most basic elements of Black Letter Law or even common decency. Now it is being treated as a real issue. TRANSLATION: WF wants the Ohio Supreme Court to rule that ANYONE in the securitization chain can enforce the note and mortgage and that the effect on the marketability of title to the property and the clouding of title should be ignored. And they are saying they can do that without notifying, serving or suing anyone else in the securitization chain — even though WF never funded the loan, doesn’t have a dime in the deal and basically is using procedural devices the steal homes from unwary homeowners who do not have the legal expertise or access to to lawyers with sufficient understanding of securitization to oppose the obviously unfair and unjust result. When we started this blog we predicted that the entire issue, in legal circles, would come down to whether the pretender lenders were successful in getting the courts to see only the individual transactions, rather than all the transactions in the securitization chain taken as a whole. In legal theory this is known as the single transaction doctrine or the step transaction doctrine. The basic test is whether the deal would have ever happened if all the parties knew what was going on. The answer is clearly “NO!” Would an investor have knowingly invested cash into a pool where the loans were based upon obviously inflated property values that could not, would not and did not withstand the test of time (even a few weeks in some cases), NINJA (no income, no job, no assets, no problem) or were subprime borrowers with credit histories that were questionable? Would investors have funded $800,000 for a bond (mortgage-backed security) where the proceeds were to be used for funding a $300,000 mortgage and the rest was kept for fees and profits? Who would buy something for investment where the moment they executed the paperwork they were taking a 60% loss? Never mind the fact that on the secondary market the bonds are selling for $.01-$.03 cents on the dollar. So what does that mean? They are either worthless, unenforceable or both. The mortgage and the note have been “separated” unlike what you have always heard about mortgages following notes and vice versa….the legal consequences of securitization are this…the note is at best unsecured and worst ….for the investor unenforceable. Would borrowers have signed papers and put up their home for collateral if they knew about the inflated home values when they were depending upon the appraisers who were hired by the lenders? Would investors have signed papers and put up the cash for the securitization chain if they knew about inflated securities values, bogus AAA ratings and security quality when they were depending upon rating agencies that were hired by investment banks who were the issuers of the bonds and insurance policies from companies insuring the potential default of the mortgages backing the cash flows that provided the return on the securities without insufficient assets to cover the liability to pay in the event of a claim? Would borrowers have signed papers knowing that the profit being made by intermediaries was as much or more than the amount of their loan? Obviously not. How many borrowers would have knowingly signed papers and moved into a house from which it was certain they would be evicted? because the “lender” knew or should have know that mortgage would default with the first adjustment in payment… This all occurred because Wall Street and all the intermediaries, banks, mortgage originators, mortgage brokers etc. kept the investor and the borrower from ever meeting or even knowing they existed. Even if this tricky theory of WF was to be accepted arguendo, in order to have a complete adjudicate of all rights and obligations and in order to clear title and present a certificate of title that was marketable (not subject to being later overturned by claims of fraud on the court) ALL parties in the securitization scheme must be given notice and an opportunity to be heard. Just how well would some hedge fund like it if they received a notice from Wells Fargo or Countrywide or Ocwen or HSBC saying that there was a foreclosure going on, that the hedge fund was named as a defendant because their interest mortgages and notes they were told they had purchased were about to be extinguished and kept by an intermediary? WF is trying to make the Ohio Supreme Court a party to fraud. Isn’t that why Countrywide was sued by Greenwich Financial et al? The investors were saying that Countrywide had no right to agree to short sales, modifications or anything else because the Hedge fund owned the loans not the servicer. This is not theoretical… it is actual. Why did “mortgage modifications” come to a halt last fall and early this year? Despite Obama and Financial Institution rehetoric about assisting homeowners and modifyin “millions of mortgages” the Greenwich vs. Countrywide suit “froze” all modifications because the parties, from servicers to “loan mod” companies claiming to assit borrowers have NO authority to modify the mortgage and would not act for fear of similar litigation. WF admits in its brief that the issue is multiple liability for the borrower because ANYONE in the securitization chain can sue, but says that doesn’t matter. Probably true. It doesn’t matter to these interlopers but it sure matters to the “borrower” and the “investor” (both of which could simply be regarded as VICTIMS). They are the only parties that stand to lose money or assets….READ: actually be damaged. Of course the effect on title to the property is horrific. Think about it. You have a homeowner who is on the deed and upon foreclosure a certificate of title is issued to a party that was not named in the mortgage or deed of trust. You have a bondholder who has received a bond (mortgage backed security) listing the borrower and the security interest in the property as being conveyed to the investor. And it is all in the public record and public domain. You have a mortgage or deed of trust that when all the smoke and mirrors are cleared away says “we are going to pass the title around here to whomever we want and when we are good and ready we’ll tell you who has title.” So the notice of record declares that there will off-record transactions but that nobody can know until private parties declare the effect of those transactions. What they are advocating is the judicial act of ignoring the requirements of federal law, state law and common law. Why don’t they just come out and say it like Dick Durbin, Senior Senator from Illinois said it “When it comes to banking, they own the the government.” They certainly used the government as their private bank account (TARP, Federal Bailout, U.S. Treasury bailout and credits, etc.). Why don’t we just come right out and say it — forget the constitution, forget the declaration of independence, forget the rule of law, forget federal legislation, executive agency rules, state laws and common law, we are now the Empire of Great Goldman Sachs. And they are saying this is “industry practice” now. True, it IS industry practice and that is why the indsutry as a whole has put itself in the position of potential civil, administrative and criminal liability and sanctions. But up until the last few years any such practice would have have been properly condemned. Everything is relative, “common practice” in the last 5-10 years is not what changes Black Letter Property Law, which for 200 plus years has been belonged to the states. Just because the banking industry quit crossing their T’s and dotting their I’s and devised a scheme, using their own proprietary, member based, electronic system(MERS) to avoid the various state and local fees dues states and counties for recording an interest in real property In a society of laws (not men) it is government that has the power to declare true title of record. It is only in a nation where we governed by the rule of privileged men instead of laws that we grant such powers to private entities and bind public branches of government to the edict of companies like MERS (Mortgage Electronic Registration Systems). EGGS seeks to complete its bloodless coup turning a republic into an oligopoly and unfortunately the Obama administration doesn’t seem to get it even though the citizens of this once great country see it clearly. If this doesn’t turn the rule of law on its head, I don’t know what does. We can only hope that as these cases slowly move up the appellate process that all judges come to realize this is not an ideological issue it is a moral issue and a constitutional issue. We are under attack — even the people who don’t think they under attack. The most basic rights enunciated in the United States Constitution and the Declaration of Independence are being siphoned away. This is no longer about the people who have lost their homes or the people who are in the process of losing their homes. This is about the clear and present danger that any of us could lose anything we have by edict from the rich and powerful. If the Courts go along with it, we are doomed as a nation, as a society and as hope for the world. The genius’ on Wall Street forgot that we are dealing with REAL property here and more importantly REAL people…and families. When we talk about “Black Letter Law” we are not just talking about circa last 200 years adopted from the English Lords where the issue of “standing” came from….Go back to your Bible and read the Old Testament Book of Ruth….even Boaz took off his shoe and had 10 elders in the town witness the legal transfer of interest in real property from Naomi’s heirs so there would be no “cloud on his title” or one might say today that he “perfected his interest” in that property. Wells Fargo’s argument is that a group of us in the mortgage industry came up with our own set of rules a few years ago and in recent history(the last 10 years not the last 100 years) it kind of became industry practice so ….we expect the courts ….after the fact to adapt to OUR standard….yeah right. Talk about a weak argument….it would get you an “F” in Law school…consequently the American public knows it doesn’t hold water. Judges are you listening?

Servicer Starts Door-Knocking Division

June 5, 2009

Franklin Credit Management Corp., the Jersey City third-party mortgage servicer, has expanded its operations to include Face-to-Face Home Solutions, a door knocking division that tries to reach delinquent borrowers. Gordon Jardin, Franklin Credit’s chief executive, said the unit was started from scratch earlier this year as part of a broader repositioning of the company, which now offers underwriting, due diligence and asset valuations. Franklin had been a subprime lender that $54 billion-asset Huntington Bancshares Inc., in Columbus, Ohio, inherited from its 2007 purchase of Sky Financial Group. The company currently services 32,000 loans, most of them second mortgages, worth more than $2 billion. “We are definitely actively involved in trying to find ways to maximize the returns to Huntington on that portfolio,” Jardin said in an interview. Franklin’s strategy had been “to maximize cash flow,” Jardin said, while Huntington’s strategy now is to work out the loans. “I think most companies are trying to determine what their strategy should be,” he said. “It’s too early to determine how well the performance of loans will be if we modify them,” under the Obama Administration’s Home Affordable Modification Program. Franklin “has had the beginnings of some success” is reaching delinquent borrowers though it is too early to tell if the contact rate is better than the industry average. Roughly 50% of delinquent borrowers have no contact with their servicer before a home goes into foreclosure. “That’s frustrating, because you do have a legal contract, you have an agreement with the borrower and why they can’t make a payment often is unclear,” Jardin said.

SEC Accuses Mozilo of Fraud, Insider Trading

June 5, 2009

Angelo Mozilo, the founder and former chairman/CEO of Countrywide Financial Corp. — and an icon in the industry for many years — was slapped with a massive civil fraud complaint by the Securities and Exchange Commission on Thursday afternoon, accused of deliberately misleading investors in the company’s stock and engaging in insider trading. David Siegal, Mr. Mozilo’s attorney released a statement calling the SEC charges “baseless,” adding that the lender’s risks “were well disclosed to and understood by the marketplace.” The SEC also sued former CFC executives David Sambol and Eric Sieracki, accusing them and Mr. Mozilo of “falsely assuring investors” that Countrywide was funding “primarily” prime quality loans and had avoided the excesses of its competitors. The two men could not be reached for comment. Last summer Bank of America bought CFC for a few dollars a share compared to a one-time high of $40. The agency released a memo that Mr. Mozilo wrote in April 2006 where he refers to Countrywide’s subprime business as “the poison of ours.” According to figures compiled by National Mortgage News Countrywide was the nation’s largest subprime lender and servicer during its final years of operation, but had not made a serious run at A- to D lending until the early 2000s. The agency accuses him of selling $140 million of stock from November 2006 until August 2007 while “he was aware of material, non-public information concerning Countrywide’s increasing credit risk.” In past interviews with NMN Mr. Mozilo maintained that his stock sales were legal and followed the rule of law. In March 2007 he told this newspaper that he was selling the stock in question, noting, “I have almost all my personal net worth tied up in the company.” He defended the sales, saying “I have created $25 billion in value for the shareholders. It’s been one of the best performing stocks on the New York Stock Exchange. I gave them 98% of the value and took 2%. And they [the shareholders] didn’t have to do the work. I did it for them.”

SEC Case Focuses on Countrywide’s Payment Option ARMs

June 5, 2009

In charging former Countrywide CEO Angelo Mozilo with fraud, the Securities and Exchange Commission is zeroing in on the lender’s payment option ARM business, a controversial product that Mr. Mozilo initially embraced and then later cursed. According to figures collected by National Mortgage News Countrywide Financial Corp. was the nation’s largest POA lender in 2006, a year in which Mr. Mozilo wrote several memos cited by the SEC in its complaint. (CFC was also the largest POA funder in 2007, originating a record $86 billion in these notes which eventually can become negatively amortizing.) In one memo Mr. Mozilo laments that CFC has “no way, with reasonable certainty, to assess the real risk of holding” POAs on its balance sheet. He adds that by putting so many loans on CFC’s books “we are flying blind on how these loans will perform in a stressed environment.” One loan broker who funded POAs for CFC told this newspaper that the loans were hugely profitable for the company because of all the points it charged on them. When CFC was eventually sold to Bank of America last year it had $80 billion in loans on its balance sheet — including POAs and second liens. The SEC accuses Mr. Mozilo of knowing how risky these products were but without sharing his opinions with investors. “Concealed from shareholders was the true Countrywide, an increasingly reckless lender assuming greater and greater risk,” said SEC director of enforcement Robert Khuzami. During CFC’s last year of operations, the lender began sending out warning letters to borrowers who were choosing the ‘neg am’ option on POAs, telling them of the risks.

SEC Accuses of Mozilo of Fraud, Insider Trading

June 4, 2009

Angelo Mozilo, the founder and former chairman/CEO of Countrywide Financial Corp. — and an icon in the industry for many years — was slapped with a massive civil fraud complaint by the Securities and Exchange Commission on Thursday afternoon, accused of deliberately misleading investors in the company’s stock and engaging in insider trading. A message left at his home in Granada Hills, Calif. was not returned at press time. The SEC also sued former CFC executives David Sambol and Eric Sieracki, accusing them and Mr. Mozilo of “falsely assuring investors” that Countrywide was funding “primarily” prime quality loans and had avoided the excesses of its competitors. The two men could not be reached for comment. Last summer Bank of America bought CFC for a few dollars a share compared to a one-time high of $40. The agency released a memo that Mr. Mozilo wrote in April 2006 where he refers to Countrywide’s subprime business as “the poison of ours.” According to figures compiled by National Mortgage News Countrywide was the nation’s largest subprime lender and servicer during its final years of operation, but had not made a serious run at A- to D lending until the early 2000s. The agency accuses him of selling $140 million of stock from November 2006 until August 2007 while “he was aware of material, non-public information concerning Countrywide’s increasing credit risk.” In past interviews with NMN Mr. Mozilo maintained that his stock sales were legal and followed the rule of law. In March 2007 he told this newspaper that he was selling the stock in question, noting, “I have almost all my personal net worth tied up in the company.” He defended the sales, saying “I have created $25 billion in value for the shareholders. It’s been one of the best performing stocks on the New York Stock Exchange. I gave them 98% of the value and took 2%. And they [the shareholders] didn’t have to do the work. I did it for them.”

GMAC Sells $4.5B of Debt Through FDIC Program

June 4, 2009

GMAC Financial Services said it has priced $4.5 billion of debt guaranteed by the Federal Deposit Insurance Corp. through the agency’s Temporary Liquidity Guarantee Program. GMAC, the parent of Residential Capital Corp., the nation’s fifth largest mortgage servicer, said the offering will further improve its liquidity position. The securities offering included $3.5 billion of senior fixed-rate notes and $1 billion of senior floating rate notes. The debt comes due in December 2012. In May 2009, GMAC received regulatory approval to participate in the TLGP for up to $7.4 billion. Earlier this year the company received a $5 billion infusion through the Treasury Department’s TARP program.

Mortgage Servicing: Making Sure Your Payments Count

When you apply for a home mortgage, you may think that the lender will hold and service your loan until you pay it off or you sell your house. That’s often not the case. In today’s market, loans and the rights to service them often are bought and sold.

A home may be one of the most expensive purchases you ever make, so it’s important to know who is handling your payments and that your mortgage account is properly credited. The Federal Trade Commission (FTC) wants you to know what a mortgage servicer does and what your rights are.

Mortgage Servicers: Their Responsibilities to You

A mortgage servicer is responsible for collecting your monthly loan payments and crediting your account. A servicer also handles your escrow account, if you have one.

Escrow Accounts

An escrow account is a fund held by your servicer into which you pay money to cover charges like property taxes and homeowners insurance. The escrow payments typically are included as part of your monthly mortgage payments. The servicer pays your taxes and insurance as they become due during the year. If you do not have an escrow account, you are responsible for paying your taxes and insurance and budgeting accordingly.

The Real Estate Settlement Procedures Act (RESPA), enforced by the Department of Housing and Urban Development, is the major law covering escrow accounts. If your mortgage servicer administers an escrow account for you, the servicer is generally required to make escrow payments for taxes, insurance, and any other charges in a timely manner. Within 45 days of establishing the account, the servicer must give you a statement that clearly itemizes the estimated taxes, insurance premiums, and other anticipated charges to be paid over the next 12 months, and the expected dates and totals of those payments.

Under RESPA, the mortgage servicer also is required to give you a free annual statement that details the activity of your escrow account. This statement shows your account balance and reflects payments for your property taxes, homeowners insurance, and other charges.

Transfer of Servicing

If your loan is about to be sold, you generally get two notices: one from your current mortgage servicer; the other from the new servicer. Usually, your current servicer must notify you at least 15 days before the effective date of the transfer, unless you received a written transfer notice at settlement. The effective date is when the first mortgage payment is due at the new servicer’s address. The new servicer must notify you within 15 days after the transfer has occurred.

The notices must include:

• the name and address of the new servicer.
• the date the current servicer will stop accepting your mortgage payments.
• the date the new servicer will begin accepting your mortgage payments.
• toll-free or collect-call telephone numbers, for the current and new mortgage servicer, for information about the transfer.
• whether you can continue any optional insurance, such as credit life or disability insurance; what action, if any, you must take to maintain coverage; and whether the insurance terms will change.
• a statement that the transfer will not affect any terms or conditions of your mortgage, except those directly related to the servicing of the loan. For example, if your contract says you were allowed to pay property taxes and insurance premiums on your own, the new servicer cannot demand that you establish an escrow account.

There is a 60-day grace period after the transfer: during this time you cannot be charged a late fee if you mistakenly send your mortgage payment to the old servicer. In addition, the fact that your new servicer may have received your payment late as a result cannot be reported to a credit bureau.

Posting Payments

Some consumers have complained that they’ve been charged late fees, even when they know they made their payments on time. To help protect yourself, keep good records of what you’ve paid, including any billing statements, canceled checks, or bank account statements. You also may check your account history online if your servicer’s Web site has this feature. If you have a dispute, continue to make your mortgage payments, but challenge the servicing in writing (see Sample Complaint Letter to Lender), and keep a copy of the letter and any enclosures for your records. Send your correspondence by certified mail, and request a return receipt. Or send it by fax, and keep a copy of the transmittal confirmation.

Force Placed Insurance

It’s important to maintain the required property insurance on your home. If you don’t, your servicer can buy insurance on your behalf. This type of policy is known as force placed insurance; it usually is more expensive than typical insurance; and it provides less coverage. The primary purpose of a force placed policy is to protect the mortgage holder, not the property owner.

Review all correspondence you receive from your mortgage servicer. Your mortgage servicer may request that you provide a copy of your property insurance policy. Respond promptly to requests regarding property insurance, and keep copies of all documents you send to your mortgage servicer.

If you believe there’s a paperwork error and that your coverage is adequate, provide a copy of your insurance policy to your servicer. Once the servicer corrects the error, removes the force placed coverage, and refunds the cost of the force placed policy, make sure that any late fees or interest you were charged as a result of the coverage also are removed.

Fees

Review your billing statements carefully to make sure that any fees the servicer charges are legitimate. For example, the fees may have been authorized by the mortgage contract or by you to pay for a service. If you do not understand what the fees are for, send a written inquiry and ask for an itemization and explanation of the fees. Also, if you call your mortgage servicer to request a service, such as faxing copies of loan documents, make sure you ask whether there is a fee for the service and what it is.

Inquiries and Disputes

Under RESPA, your mortgage servicer must respond promptly to written inquiries, known as qualified written requests (see Sample Complaint Letter to Lender). If you believe you’ve been charged a penalty or late fee that you don’t owe, or if you have other problems with the servicing of your loan, contact your servicer in writing. Be sure to include your account number and clearly explain why you believe your account is incorrect. Your inquiry should not be just a note on the payment coupon supplied by your servicer, but should be sent separately to the customer service address.

Within 20 business days of receiving your inquiry, the servicer must send you a written response acknowledging it. Within 60 business days, the servicer either must correct your account or determine that it is accurate. The servicer must send you a written notice of the action it took and why, along with the name and telephone number of someone you can contact for additional assistance.

Do not subtract any disputed amount from your mortgage payment. Some mortgage servicers might refuse to accept what they consider to be partial payments. They might return your check and charge you a late fee, or claim that your mortgage is in default and start foreclosure proceedings.

 

Sample Complaint Letter to Lender The following is a sample qualified written request from you, the borrower, to a lender. Use this format to address complaints under the Real Estate Settlement Procedures Act (RESPA). Attention Customer Service: Subject: Your loan number Your Name Your Address Your City, State, Zip Code This is a “qualified written request” under Section 6 of the Real Estate Settlement Procedures Act (RESPA). I am writing because: Describe the issue or the question you have and/or what action you believe the lender should take. Attach copies of any related written materials. Describe any conversations with customer service regarding the issue and to whom you spoke. Describe any previous steps you have taken or attempts to resolve the issue. List a day time telephone number in case a customer service representative wishes to contact you. I understand that under Section 6 of RESPA you are required to acknowledge my request within 20 business days and must try to resolve the issue within 60 business days. Sincerely, Your name

Fair Debt Collection

By law, a debt collector is a person who regularly collects debts owed to others. Your mortgage servicer is considered a debt collector only if your loan was in default when the servicer acquired it. If that’s true, you have additional rights that you can read about in the FTC’s brochure “Fair Debt Collection.”

Your Credit Report

Many mortgage companies provide information about your payment history to credit bureaus, companies that maintain and sell consumer credit reports — which contain information about your credit payment history — to other creditors, employers, insurers, and businesses. Both the credit bureaus and the information provider have responsibilities for correcting inaccurate or incomplete information.

If you believe that your mortgage servicer has provided inaccurate information to a credit bureau, contact the credit bureau and the servicer. Tell the credit bureau in writing (see Sample Dispute Letter to Credit Bureau) what information you believe is inaccurate. Include copies (NOT originals) of documents that support your position. In addition to providing your complete name and address, your letter should clearly identify each item in your report you dispute, state the facts, and explain why you dispute the information, and request deletion or correction. You may want to enclose a copy of your report with the items in question circled. Send your letter by certified mail, return receipt requested, so you can document what the credit bureau received. Keep copies of your dispute letter and enclosures.

Credit bureaus must re-investigate the items in question — usually within 30 days — unless they consider your dispute frivolous. They also must forward all relevant information you provide about the dispute to the information provider. After the information provider receives notice of a dispute from the credit bureau, it must investigate, review all relevant information provided by the credit bureau, and report the results to the credit bureau. If the information provider finds the disputed information to be inaccurate, it must notify all national credit bureaus so they can correct this information in your file. Disputed information that cannot be verified must be deleted from your file.

• If your report contains erroneous information, the credit bureau must correct it.
• If an item is incomplete, the credit bureau must complete it. For example, if your file showed that you were late making payments, but failed to show that you were no longer delinquent, the credit bureau must show that you’re current.
• If your file shows an account that belongs to another person, the credit bureau must delete it.

When the re-investigation is complete, the credit bureau must give you the written results and a free copy of your report if the dispute results in a change. If an item is changed or removed, the credit bureau cannot put the disputed information back in your file unless the information provider verifies its accuracy and completeness, and the credit bureau gives you a written notice that includes the name, address, and phone number of the provider.

Also, if you request it, the credit bureau must send notices of corrections to anyone who received your report in the past six months. If a re-investigation does not resolve your dispute, ask the credit bureau to include your statement of the dispute in your file and in future reports.

In addition to writing to the credit bureau, tell the servicer in writing that you dispute an item. Include copies (NOT originals) of the documents that support your position. If a servicer specifies an address for disputes, it is important to send your dispute to that address. If the provider then reports the item to any credit bureau, it must include a notice of your dispute. If you are correct — that is, if the disputed information is inaccurate — the information provider may not report it again.

 

Sample Dispute Letter to Credit Bureau Date Your Name Your Address Your City, State, Zip Code Complaint Department Name of Credit Reporting Agency Address City, State, Zip Code Dear Sir or Madam: I am writing to dispute the following information in my file. The items I dispute also are encircled on the attached copy of the report I received. (Identify item(s) disputed by name of loan servicer and loan number.) This item is (inaccurate or incomplete) because (describe what is inaccurate or incomplete and why). I am requesting that the item be deleted (or request another specific change) to correct the information. Enclosed are copies of (use this sentence if applicable and describe any enclosed documentation, such as payment records, court documents) supporting my position. Please re-investigate this (these) matter(s) and (delete or correct) the disputed item(s) as soon as possible. Sincerely, Your name Enclosures: (List what you are enclosing)

If You Have a Complaint

If you believe your mortgage servicer has not responded appropriately to your written inquiry, contact your local or state consumer protection office. You also should contact the Department of Housing and Urban Development (HUD) to file a complaint under the RESPA regulations. Write: Office of RESPA and Interstate Land Sales, Department of Housing and Urban Development, 451 Seventh Street, S.W., Room 9154, Washington, DC 20410.

In addition, you may want to contact an attorney to advise you of your legal rights. Under certain sections of the RESPA, consumers can initiate lawsuits and obtain actual damages, plus additional damages, for a pattern or practice of noncompliance. In successful actions, consumers also may obtain court costs and attorney’s fees.

You may want to contact a housing counselor to discuss your situation. You can call HUD’s hotline at 1-800-569-4287 for a referral to a local HUD-approved housing counselor.

You also may wish to contact the FTC.

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters consumer complaints into the Consumer Sentinel Network, a secure online database and investigative tool used by hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.