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Au revoir Allonhill: OCC Finally Pulls The Plug
I first wrote about massively conflicted OCC foreclosure review firm Allonhill on nakedcapitalism, here:
http://www.nakedcapitalism.com/2011/12/michael-olenick-the-administration-likes-foxes-in-charge-of-henhouses-%E2%80%93-proof-that-occ-foreclosure-reviews-are-a-sham.html
Gretchen Morgenson picked it up for the NYT, here:
http://www.nytimes.com/2011/12/25/business/foreclosure-relief-dont-hold-your-breath-fair-game.html
Took a few months but now the OCC has reacted; Allonhill’s finished:
http://www.occ.treas.gov/news-issuances/news-releases/2012/nr-occ-2012-74.html
Sue, meet David J. Stern. He can tell you what happened to his sham company DJSP after I showed his investors he was grossly misleading them.
To Sue Allon, and all those out there like her:
Updated: That last part where the OCC arrogantly proclaims “The decision does not reflect on the quality of work performed to date by Allonhill” is bunk. Of course it does. Every Aurora/Allonhill file needs to be reviewed by a genuinely independent auditor. Send the bill for the re-reviews to Sue Allon, to John Walsh who signed off on allowing Sue Allon to review her own work, or to Aurora who thought they’d get away with their latest sleazy trick. Whoever .. as long as it isn’t US taxpayers. But obviously they need to start from scratch.
Four Year Old Foreclosure .. Oops, Wrong Bank
“Equity imperatively demands of suitors in its courts fair dealing and righteous conduct with reference to the matters concerning which they seek relief. He who has acted in bad faith, resorted to trickery and deception, or been guilty of fraud, injustice, or unfairness will appeal in vain to a court of conscience, even though in his wrongdoing he may have kept himself strictly ‘within the law.’” Epstein v. Epstein, 915 So.2d 1272 (FL 4DCA, 2005), emphasis added.
I’ve written several times about my own foreclosure. I purchased a house with a girlfriend, the idea being it would appreciate then she would refinance and pay me back the $75K I brought to closing.
First, let me say to readers, friends .. this is an awful idea. I’d say don’t try it at home, but it’s more accurate to say don’t try it on a home. :)
Predictably, we quickly split up and I eventually purchased my own house, that I’ve since paid for.
My ex-girlfriend still lives in the other and soon after we split I asked the “bank” — knowing then virtually nothing about the mortgage industry — what to do. ”Stop paying for three months then you can short sell it,” they answered. ”This is a full-doc loan with a substantial down-payment, no second, in an area with rapidly decreasing value; a short sale should be easy.”
I followed their advice, even going so far to paint, improve landscaping, and pretend I really was selling a house rather than mitigating a breach. That worked well because I received two short-sale offers, both above generally acceptable values. One was for cash and the other a 50% down-payment on a pre-approved loan.
Both legally binding offers had clear, unambiguous deadlines, and I was asking the bank for no concessions other than to close the deal. That is, I was attempting to mitigate a breach in good faith. This wasn’t a strategic default, though I do not see anything wrong with strategic defaults; this was “owning” a house with an ex-girlfriend and reasonably desiring not to.
My “bank,” perennial bad-boy Aurora Loan Services — who had “purchased the loan” from the originating “bank,” GMAC not long before — accepted the offers months later, after they’d expired and after the value of the house plunged. Needless to say, those buyers were long gone.
While Aurora was extremely slow to mitigate the breach they’d induced they were extremely fast to hire fraudster David J. Stern to file a foreclosure.
I honestly find many foreclosure stories boring, and a little sad, so I’ll cut to the end: the latest law firm — the formerly venerable Broad & Cassel — filed their third amended complaint, and an umpteenth copy of the note; that is, the loan. It is clearly and unambiguously endorsed to Deutsche Bank, who is named nowhere in the lawsuit.
Deutsche Bank, the owner of the loan, appears nowhere in the foreclosure except on the note itself. Assuming Stern didn’t forge the note — which, for Stern, is admittedly a big assumption — I’ve been sued by the wrong bank.
At this point, I’m ready to write my own foreclosure.
This should have been a short-sale years ago, with little or no loss to investors. Instead it’s turned into a fiasco: years of protracted litigation and junk fees as Aurora continues to slog along. No doubt the loss severity will reach some threshold — 100% give or take a little — where they’ll magically figure out how to either prosecute their foreclosure or reappear and offer to close this never-ending saga.
Every month investor losses needlessly mount. Every month my credit sits in the tank. Oh yeah, and every month Aurora continues to collect higher servicing fees.
If Aurora had fulfilled their obligation to investors and to me to mitigate this breach, and closed that short sale, they would have collected nothing for the past couple years. Zero is much higher than the net amount I suspect they’ll end up with on this loan after the inevitable lawsuit against them by investors and/or the mortgage insurer.
Aurora can forget a statute of limitations defense: every month this continues they reset the clock for the inevitable fraud claims.
Forget the “living for free,” nonsense: if I amortize the amount I put down for that house, the payments I made, and the time I lived there I could have purchased it for cash at its current value. My ex-girlfriend has been living for free for years (no comment on my current longtime girlfriend’s feelings about that), but she is not me.
At least one law firm that worked on this fiasco, Stern — who Broad & Cassel has plead deserves to be paid for his malpractice — has disappeared in a fabulous and famous explosion of fraud after my data proved he was a sociopathic liar. Boom.
The second law firm, outfit run by Elizabeth Wellborn, quickly vanished after I wrote to Lizzie that I looked forward to finding out who her “friends at the courthouse” that will “speed your eviction” are, a statement she’d posted on her website. Ciao.
I have no idea what’s happened to Aurora’s OCC loan reviewer, Allonhill, after I found the company was founded and run by the same woman who’d run a prior company, Murrayhill, that created and audited Aurora’s default practices. I suspect it’s see ya’ Susie.
At some point I hope to find out which trust actually owns this loan — even with my large data sets my own loan has disappeared — so I can work with the investors and the mortgage insurer to bring about some justice to Aurora Loan Services. They deserve to join the ranks of the incompetent vendors they’ve hired.
Something is seriously wrong when a borrower spends years trying to bring a foreclosure to fruition only to be frustrated by vendors of the servicer — who, thanks to Lehman’s bankruptcy, may not even have paid for servicing rights — at the expense of bond investors and the mortgage insurer.
Foreclosure is what lawyers call an “equitable remedy.” Any party with “unclean hands” is theoretically unable to receive “equitable relief,” in courts operating under equity, mainly foreclosure and family court. The rule is easy and ancient: if you lie you lose.
Dismissal for unclean hands seldom happens though strict enforcement would be better for everybody that matters. Investors and mortgage insurers could sue servicers and their lawyers for the losses as the cases are dismissed. Judges would clear their dockets and, thanks to malpractice insurance, investors would get paid. Investors would still be able to force borrowers to pay something under a doctrine where you can’t get free houses, but that something would likely be something affordable.
Hopefully I’ll get the chance to work with the genuine parties who lent me money to rip back the money Aurora meant to make for month after month of delay, for this loan and every loan like it.
MBA & Florida Foreclosure Mill Lawyers: MBS Bond Investors Aren’t “Frustrated”
Housing Wire published an article, Nightmare continues for Florida foreclosure system, that meant to blame foreclosure defense lawyers for slow foreclosure processing times. However, the article inadvertently highlighted a different but more genuine cause for the slowdown in the swamp.
Two lawyers are cited, David Rodstein of the Rodstein Law Group, and Jane Bond of McCalla Raymer. McCalla Raymer is large foreclosure filer in other states, though they’re a relatively recent entrant to Florida. The Rodstein Law Group is definitely a new firm, as I’ll explain later.
“It’s not as bad as it seems,” the article quotes Rodstein, speaking about the backlog of Florida foreclosures. ”It’s much, much worse.”
Rodstein explains his reasoning: “Borrowers can hire these (foreclosure defense) attorneys for a small monthly payment — much less than the mortgage — and the attorney can come in and easily delay the case for a year plus.”
Bond notes the problem escalated after the firm run by disgraced lawyer David J. Stern blew up. One bank went from having six lawyers in FL to 26, she adds.
Since I don’t know which servicer she is referring to I can’t check my database to see who these new firms might be. I strongly suspect two of these new firms include McCalla Raymer and the Rodstein Law Group.
“The judges are frustrated,” Bond notes. “The attorneys are frustrated. The servicers are frustrated. Everyone is frustrated.”
I’m frustrated too because, you see, Rodstein worked for disgraced and shuttered law firm Ben-Ezra Katz, and whined about the pace that his former employer was forced to turn over files to government-owned Fannie Mae. It was this slow, disorganized turnover — and the reckless lawyering that led to it — which sent our court system reeling and have caused massively higher loss severities to MBS investors.
“I really wish there was more time to do this in a more orderly manner,” said then Ben-Ezra & Katz attorney David Rodstein to the Palm Beach Post on Feb. 25, 2011, Fannie Mae wants files back from fired firm.
Let’s repeat that: the Mortgage Bankers Association asked a lawyer who worked for a firm that was shuttered based on ethical issues — and who then worked to delay handing files back to banks — to chair a committee and lie that it is foreclosure defense lawyers who slowed down foreclosures.
After almost exactly one year Rodstein apparently forgot that he actively worked to slow the transfer of files back to Fannie Mae, which as the Housing Wire article correctly notes, ground the entire FL foreclosure system to a halt. Now a lawyer directly responsible for that slowdown blames the dysfunction on foreclosure defense lawyers rather than accepting any form of personal responsibility.
As for Bond she surely knows that the General Counsel of her new employer is former Fannie Mae lawyer Susan Reid, who had something to do with attorney supervision in Florida. I’d like to be more specific on Reid’s responsibilities but the FHFA, the government agency overseeing Reid’s former employer Fannie Mae, refuses to answer Freedom Of Information Act requests. Fannie argues that they’re a “private” company, albeit one who’s soaked up $180 billion in taxpayer dollars along with cousin company Freddie Mac, and not subject to FOIA disclosure.
I’m sure readers will be shocked — shocked! — to learn that Reid left Fannie Mae after just under 19 years there, in Sept., 2010, right after Stern’s firm was exposed as a fraud-factory and exploded Death Star style. Reid worked for Fannie when they blew off a report from Nye Lavelle that decisively proved Stern was a crook.
It’s telling that these are the two lawyers the MBA chooses to chair a panel on the subject about why foreclosures linger in Florida. But it’s even more insightful that neither Rodstein nor Bond told reporter Jon Prior about the role they or their firms played in the meltdown.
Bond is right about judges being frustrated. Just today I heard a judge literally screaming at a foreclosure lawyer about her inability to “responsibly” handle these cases as she argued to delay a case. As for the other two “frustrated” groups, foreclosure lawyers and servicers, they can find the source of their frustration in any mirror.
There are two groups notably missing in Rodstein and Bond’s list: investors, who actually funded the loans, and borrowers trying to bring their cases to resolution. I realize that to Rodstein and Bond borrowers and lenders exist just to feed them fees but you’d think they’d throw them a crumb of sympathy, especially investors who’s losses continue to climb.
Bond investors, the organizations that wrote the checks, are entirely missing in their narrative.
Maybe Bond, Rodstein, and the MBA reason that both borrowers and lenders were dumb enough to trust servicers, so Rodstein, Bond, and the misnamed MBA — which doesn’t seem to hold any regard for bond investors whatsoever — believe neither has any rights. Bond holders and borrowers, in their world, are supposed to pay endless fees to the irresponsible, dishonest, and reckless agents and their attorneys that have mangled the borrower-lender relationship beyond recognition.
Rodstein’s former employer has slowed down more foreclosure cases than any Florida foreclosure defense lawyer, and maybe more than all of them put together. If Reid was overseeing FL attorney compliance during her time with Fannie Mae then the GC of Bond’s firm is responsible for slowing down even more cases than Rodstein. Except for Stern and Ben-Ezra themselves it is difficult to think of a worse choice of mouthpieces to whine about the pathetic pace of Florida foreclosures than these two liars lawyers.
“Fool me once, shame on you; fool me twice, shame on me,” is an ancient saying. By hiring the same people who caused the mess, rearranged at new law firms, who refuse to take any responsibility for the mess they caused, servicers are setting the system up for another meltdown.
I’d be happy to use my database to pull the Bar ID’s of any lawyer involved in the “old” system and deliver a list of lawyers — let’s call it a reputational background check .. OK, or maybe a blacklist — to investors who can and should insist servicers ban them from working on new cases. Pursuant to 2008 HERA’s mandate to minimize taxpayer losses the FHFA is obligated to ban the GSE’s from hiring these reckless, irresponsible, and dishonest attorneys and any firm that would hire them.
The Florida Bar has obviously decided not to take any disciplinary measures against these lawyers. Indeed, Stern himself still has a license in good standing to practice law; there has been no disciplinary action taken against him. The FL Bar even threw out an ethics referral from an appellate court.
However, self-regulation can and should deliver a simple solution: fire foreclosures lawyers that had anything to do with creating the current mess, as well as any firm that hired them. That alone will send a message for new firms, with new lawyers, to responsibly and respectfully respond to the judges frustration, a feeling which — despite being non-existent to mill lawyers — I can attest is shared by bond bond investors and borrowers.
IBM Lender Services n/k/a Seterus: Stupidest Strategic Move Since AOL-Time Warner Merger
IBM is the second most valuable brand in the world, according to Intebrand’s 2011 Ranking of the Top 100 Brands. Not the second most value technology brand, nor the second most valuable American brand .. the second most valuable of any brand, anywhere.
IBM’s name alone is worth a whopping $69.9 billion dollars. Only Coca-Cola is worth more, and just barely, at $71.9 billion. Microsoft comes in third at $59 billion, Google fourth at $55.3 billion, GE at $42.8 billion .. Apple is a all the way down at eighth, with their iconic apple valued at $33.5 billion.
IBM’s market cap is $223 billion, so their good name alone accounts for 31% of the company’s value. Let’s think about that: almost one out of every three dollars this 100 year-old tech behemoth is worth comes from their good name, their reputation as the bedrock of technology, integrity, and brilliance.
When I think of IBM I think of scientists wearing white lab coats toiling away around the world to build HAL, the self aware computer that even entry-level Geeks recognizes as a one-letter decrement of IBM.
HAL, which IBM is still trying to build, lost his mind, somebody within IBM’s strategic planning group seems to have done the same and decided to ramp up “IBM Lender Services,” a foreclosure fraud-factory.
Somebody in corporate communications must have recognized that putting almost $70 billion at risk to run a document sewage plant seemed like a bad bet, so in 2011 they changed the name to “Seterus.” I don’t know if Seterus is derived from the Indonesian name “Seteru,” meaning enemy, though if so the point’s well taken: IBM Lender Services/Seterus is the worst enemy to IBM’s good name in the company’s history.
For the sake of simplicity, and because they deserve to be mocked for this wildly irresponsible move, I’ll continue to use their own original name — the name stamped on countless fraudulent court records — IBM Lender Services.
It seems like at the end of every bubble there’s an obligatory insane strategic move by a major corporation; moving a business with $107 billion in revenue into fraudulent foreclosure processing is arguably worse than the infamous AOL-Time Warner acquisition. Let’s review that deal. On Jan. 10, 2000 AOL announced it was acquiring Time Warner in a “historic merger.” Time-Warner’s stock was trading at $189.75. Two and a half years later, on Jul. 29, 2002, a share of that same stock was worth $39.90.
Granted, during the dot-com bust many stocks tumbled off a cliff. Except that Time Warner was not a dot-com; they’re a roll-up from a series of media-company acquisitions going back to 1922. They should have weathered the dot-com bust reasonably well; instead their stock slid 83.7%.
Similarly, when I tell people that IBM is in the mortgage servicing business, with a special focus on foreclosures and foreclosure document processing, they’re usually dumb-struck. Time Warner wasn’t a dot-com .. except that they were. Similarly, IBM isn’t a sleazy mortgage servicer .. except that, for whatever reason, they decided to become one.
IBM stock, which I don’t hold any position in, mainly because I’ve been meaning to write about this for a long time, deserves the same fate as Time-Warner.
If IBM think’s that’s unfair they should think about how people who were evicted from their homes felt when IBM’s fraudulent documents were used to justify the evictions.
Would those evictions have happened anyway if IBM, and the mortgage servicers who employed them, acted carefully and responsibly? As they say in court “objection .. irrelevant,” because they didn’t; they used every slimy shortcut in the book, and a few others that same book frowns upon.
Just to be clear, besides (poorly) managing the back-office functions for other banks IBM also buys servicing right and services mortgages; they’ve become what people think of as “the bank,” .. a mortgage lender, or at least the public face of one. They’ve been at this since the mid 2000′s but they’re not slowing down: less than two years ago IBM announced the acquisition of Wilshire Credit Corporation from Bank of America, an acquisition BOA inadvertently swallowed with Merrill Lynch.
Just as a reminder, “servicers” are who borrowers think of as “the bank,” the entity they engage with. Servicers collect money they send to investors, or prosecute foreclosures on behalf of investors. However, it is uncommon for services to put much, if any, of their own money into a mortgage loan.
I don’t know how government agencies — including court houses and public records repositories — could remain comfortable with the company that produced this mess. Even Fidelity had the common sense to spin-off Lender Processing Services (LPS), even as IBM was apparently doing exactly the opposite.
In an inquiry by the New Jersey Supreme Court titled “In the Matter of Residential Mortgage Foreclosure Pleadings and Document Irregularities,” Joseph M. Perry, IBM Lender Business Process Services Vice President of default management, defends the company. It’s telling that the first sentence highlights the name change.
I spent years focused on corporate strategy. I know from personal experience that sometimes corporate strategy sessions, especially when forming new product lines, can run wildly off the rails.
As a group proceeds through an exercise it’s not uncommon, after days of research, to unveil an entirely illogical or even illegal “great idea.” Every time I’ve seen this happen most participants quickly realize their exercise has taken a wrong turn; sometimes they’re annoyed, usually they laugh, but they never move forward.
IBM Lender Services is clearly an idea that should have been put to bed when it was born in some boardroom full of bored strategists. Based on IBM’s recent behavior it seems clear they’ve now realized this, but it’s not so clear what they plan to do about it (hint: recognize the loss and shut it down .. quickly).
IBM Lender Services is like a cancer to an otherwise great company. But cancer’s grow. It’s only a matter of time until Interbrand and other clients react to the reputational damage this tiny group has done, and the damage to brand value alone will more than offset even the wildest upside potential of this deal.
Missouri Indicts DocX: 137 Counts of Fraud Related Crimes for People Who Paid
Yesterday the New York Times reported that the Missouri Attorney General, Chris Koster, indicted DocX — home of former superstar robo-signer Linda Green — on 137 counts of fraud related to false releases. DocX Faces Perjury Charges in Mo. Foreclosures. Despite the headline the indictment uses the term “Deed of Release” 340 times: this indictment is about people who paid their loans then had their bank breach its obligation — which they were paid for — to mark the obligation as satisfied.
That is, this is the mirror opposite of foreclosure robo-signing: this criminal case is about protecting those who did pay but where the bank, to save a few dollars, didn’t live up to its end of the bargain.
Interestingly, I have a Linda Green signed release myself, on a house I paid off years ago. I’ve asked the bank and MERS to file a perfected instrument and have been told that shouldn’t be a problem; we’ll see. They have been filing corrective instruments in foreclosure-related cases, though not — at least to my knowledge — in cases where people paid off their homes either through refi’s or by simply paying.
It’s a bummer to pay for one’s house then have the bank use teenagers forging the name of a bank “Vice President” who’s sole work history before obtaining that job was as a Clerk in an auto-parts store and who “authorized” teenagers working after high-school to sign her name
Let’s check out loan volume in my home County during the boom and after to get a feel for how widespread this problem could be:
Ouch.
