Foreclosure Buzz

Loan servicers and their henchmen (attorneys and real estate brokers) continue to ignore the requirements of the Protecting Tenants at Foreclosure Act.  Many take the position that tenants’ leases do not have to be honored, and instead only provide a 90 day notice to vacate.  Some decide to advise tenants of their “rights” expressly.  On October 28, 2011, American Home Mortgage Servicing, Inc. (AHMSI) was sued for issuing a letter to a tenant that said as much, and refusing to change its letter in the future despite numerous requests.  Without any basis in the law, AHMSI’s representatives also demand extensive documentation within a short time frame in order to get the 90 days.   AHMSI even said for the tenant to not be concerned with an eviction.  It appears that loan servicers hope to take advantage of tenants as much as possible and hope the law is not extended past December 2014.

Rather than merely defend frivolous eviction cases — loan servicers such as AHMSI should be sued for damages and for orders to require them to comply with the law.

Here are just some of the allegations in Davis v. AHMSI et al., Civil Action No. 1:11-cv-219, US District Court, S.D. Tex., Brownsville Division:

On or about April 29, 2010 [a few weeks after the foreclosure sale], Plaintiff Davis received a letter dated April 26, 2010 from Defendant AHMS through Defendant’s counsel. The letter was titled “Notice of Foreclosure & Tenant’s Rights Under the Federal Law.” This letter gave Plaintiff Davis three days’ notice to vacate if he was not a tenant of the former owner of the home and ninety days’ notice to vacate if he was a tenant of the former owner of the home. The letter demanded that Plaintiff Davis provide a written lease or proof of payment, a telephone number and proof of six months of rent payments within three days of receipt of the letter if he was a tenant. The letter misrepresented that Plaintiff Davis must comply with this demand to qualify for the rights and protections of the PTAF. The letter also presented Plaintiff Davis with an agreed judgment. The agreed judgment provided for a justice of the peace to issue a writ of possession as early as May 17, 2010. The letter instructed Plaintiff Davis not to be concerned about receiving a citation and not to attend the eviction hearing set by the justice of the peace after he submitted the signed agreed judgment to Defendant.

By the express terms of the letter, Defendant AHMS intended to advise Plaintiff Davis of his “legal rights under federal law.” Plaintiffs attach a true and correct copy of the letter as Exhibit 2.

On or about April 30, 2010, Plaintiff Davis sent an e-mail to Defendant AHMS through Defendant’s counsel that informed Defendant AHMS that Plaintiff Davis had paid his rent for April and May to his former landlord. Plaintiff Davis included a copy of the written lease and images of rent checks for payments he had made to his former landlord with his e-mail. Plaintiff Davis also provided his telephone number and informed Defendant AHMS that he only receives visitors at his home by appointment. On or about May 14, 2010, Plaintiff Davis received a letter from Defendant AHMS dated May 5, 2010. The letter demanded that Plaintiff Davis provide the following documentation to Defendant AHMS: a complete copy of the signed lease, a completed tenant questionnaire that was attached to the letter, front and back of cancelled checks for rent paid for the last six months, front and back of the cancelled check for the security deposit paid and copies of utility bills for the property addressed to Plaintiff Davis. The letter informed Plaintiff Davis that Defendant AHMS would commence eviction proceedings against Plaintiff Davis if he failed to provide Defendant AHMS with these documents within three days of receipt of the letter. The letter also asked Plaintiff Davis to contact an agent of Defendant AHMS to confirm that his identity is the one on the lease. Plaintiffs attach a true and correct copy of the letter as Exhibit 3.

On or about May 17, 2010, Plaintiff Davis sent Defendant AHMS a letter dated May 17, 2010. In this letter, Plaintiff Davis confirmed that he had met with the agent on May 14, 2010. He also attached another copy of his lease along with proof of payment. In the letter Plaintiff Davis inquired as to whom he could pay his rent for June 2010. On or about May 26, 2010, a representative of Defendant AHMS entered the grounds of the home without Plaintiff Davis’s permission. At or about 6:40 pm the representative came to Plaintiff Davis’s front door and demanded access to Plaintiff Davis’s home. Plaintiff Davis asked the representative to leave immediately. The representative returned to his vehicle, but then walked back to Plaintiff Davis’s home and affixed a notice to the brick veneer of the home with chewing gum. During this time Plaintiff Davis had a sign prominently displayed on the grounds of his home that states that entering the grounds is forbidden.

On or about May 27, 2010, Plaintiff Davis spoke with Defendant AHMS’s representative Joe John Watson. Plaintiff Davis informed Mr. Watson of what Defendant AHMS’s other representative had done at Plaintiff’s home on May 26, 2010. Mr. Watson told Plaintiff Davis that Defendant AHMS wanted to deliver an information package to him using a different representative who would also inspect the property. Plaintiff Davis asked that he be sent the package by mail to his P.O. Box and that no more representatives of Defendant AHMS visit his home. Mr. Watson agreed.

On or about June 10, 2010 Mr. Watson called Plaintiff Davis and rescinded his agreement to communicate by mail.

Original Complaint and Exhibits here.

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Fannie Mae and Freddie Mac are dumping their law firm networks and instead will let mortgage servicers hire their own lawyers to process foreclosures.

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While paying homage to School House Rock’s “I’m Just a Bill” and a host of other classic instructive cartoons of that series that began in the 70s, the Daily Show pulled no punches in describing the Dodd-Frank financial reform law including its creation of the Consumer Financial Protection Bureau - “a sham.”  The show’s version of Bill — HR 4173 — took the stage and castigated itself:

“The only way Congress would have passed me was if the details of the rules and regulations were unspecified giving K Street lobbyists all the time they would need to water me down post-passage … and if any actual tough rule managed to squeak through, Congress people [would] cut the budget of the agency responsible for enforcing it.  The whole thing is a giant punt.  I’m no law.  I’m no law, John. I’m just an undefined, impotent, 2,300 page piece of legislative sh#t.”

Dodd-Frank Act, as portrayed by John Oliver of the Daily Show, July 29, 2011, clip here (including crass humor).

When CFPB was created, many (including me) feared it would become the next OSHA or Consumer Products Safety Commission, and that fear has become fact.  The agency has become a political football. American Banker, here.

The Obama Administration has made big promises for American families tolling with the financial services industry — like the creation of the HAMP program, but the reality is that the pillars of all his promises are easier to dodge than the Maginot Line.

The administration at least should have stuck with Elizabeth Warren who conceived the bureau to let her head it.  It is not clear whether he could have appointed her during a Senate recess (Daily Show says he could have by now, but story here re May recess) — regardless he abandoned her.  Story here. (Now of course Senate Republicans are vowing to block any nominee until the agency is stripped of power.)  The administration could have reigned in the federal Office of the Comptroller of the Currency for the issuance of weak corrective suggestions (aka “consent orders”) in response to overwhelming evidence of systemic fraud in the foreclosure process across the county — which were made by OCC and other federal agencies some say to remove the political force behind a real enforcement effort by a task force of  all 50 state attorneys general. Story here. When will borrowers achieve justice?

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MERS, that strange little company that has played a significant roll in eliminating lender responsibility, accountability and transparency pulled back the curtain some more (after Fannie clipped its wings in April, story here):

Effective July 22, 2011:

• No foreclosure proceeding may be initiated, and no Proof of Claim or Motion for Relief from Stay (Legal Proceedings) in a bankruptcy may be filed, in the name of Mortgage Electronic Registration Systems, Inc. (MERS)

• The Certifying Officer must execute the assignment of the Security Instrument from MERS before initiating foreclosure proceedings or filing Legal Proceedings and promptly send the assignment of the Security Instrument for recording in the applicable public land records

MERS Policy Bulletin 2011-5 (here).

MERS remember was supposed to merely track the ownership of a mortgage and its servicer to eliminate the requirement of multiple assignments every time a mortgage was bought and sold.  It was allegedly never invented to be a dodge of the financial service industry so the industry says.  Of course MERS morphed itself at the behest of its members of the industry and began to pretend to take actions in its name and hide the real entity behind the curtain a la the Wizard of Oz (says the courts, story here and here).

It also appears that the Certifying Officer of MERS (a lender representative with credentials granted him or her by MERS with a click of a mouse) must now record an assignment in deed records before the foreclosure begins it appears.  The assignment would purport to transfer the  right to foreclose from MERS to the current owner of the note. In judicial foreclosure states this may already be happening, but in non-judicial foreclosures MERS was skipping this step unless it was sued.  Of course, whether the assignment by the CO of MERS is any good or not is another question — does MERS have the authority to transfer or assign anything?  The right to foreclose is based on the ownership of a promissory note for which there has been a default.  MERS never collects money from borrowers, it is not authorized to collect money, it does not ever own, possess or hold the promissory note — so how can it give something to someone it never owned?  Can it transfer the right to foreclose without transferring the right to collect the money?  Some courts say MERS can, some no.  Recent cases say yes, story here.  (MERS says: “This year alone courts in Georgia, California, Michigan, Kansas, New York and New Hampshire have upheld the MERS business model recognizing MERS as a mortgagee.” MERS release here.) Regardless, it is a nice to see MERS pulling back the curtain, although I think it would gladly help to foreclose on Dorothy and her little dog too.

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