The highly successful soap opera about foreclosure, "Pyramid of Greed," is already three episodes into its 2011 season: "GI Joe and Jane and the Temple of Greed"; "Who owns the mortgage?" ; and "A monitor for Mammon (Part 1)".
In "GI Joe and Jane and the Temple of Greed", "JPMorgan Chase acknowledged this week that it overcharged some 4,000 military families for their mortgages and wrongfully foreclosed on at least 14. It's not clear how much the mistakes have cost these families, but the bank told NBC News that it’s collectively refunding about $2 million  to those affected. It has also promised to restore the homes that were lost..."
Viewers will be thrilled by this drama of how the nihilistic amoral American plutocracy is throwing the nation's own soldiers out of their homes.
"Who owns the mortgage?" is a fascinating episode, set in Massachussetts, about the angst zombie banks faced when a state high court ruled in favor of homeowners against the banks in two foreclosure cases, arguing that the banks could not prove ownership of the mortgage due to gaps in the chain of paperwork between the actual mortgages in the possession of the homeowners and the securitized bundles of mortgages where the actual mortgages ended up in derivative form. It's a real tear jerker.
In "A monitor for Mammon (Part 1)", "A third-party monitor may be required as part of any settlement of a probe by 50 state attorneys general to ensure that banks comply with foreclosure practices, Connecticut Attorney General George Jepsen said..."
Now that we know that the attorneys general have decided to settle rather than prosecute, the suspense that will take up future episodes of "A monitor for Mammon" will be: who will choose the monitor? Will the position be held by a bank examiner, a bank executive, or, if a law firm as some suggest, a law firm representing who?
"Pyramid of Greed" viewers from last season will remember the prelude to the current "Monitor" episodes: "Wall Street cowboys round up the AGs," containing perhaps the finest single scene yet in the series: a rodeo arena in which bankers in Hummers rope and hog tie 50 attorneys general.
Badlands Journal editorial board
Chase Admits Overcharging Troops on Mortgages, Improperly Foreclosing
by Marian Wang
JPMorgan Chase acknowledged this week that it overcharged some 4,000 military families for their mortgages and wrongfully foreclosed on at least 14. It's not clear how much the mistakes have cost these families, but the bank told NBC News that it’s collectively refunding about $2 million  to those affected. It has also promised to restore the homes that were lost.
According to NBC, the bank violated a law called the Servicemembers Civil Relief Act,which grants active-duty troops some protection from foreclosure and caps their mortgage interest rates at 6 percent .
The mistakes came to light after a Marine captain and his wife were overcharged, fought debt collection attempts for years, and finally filed suit. From NBC:
The Rowles' records show that while they kept making payments on their mortgage at 6 percent, the bank wrongly had been charging them at rates above 9 or 10 percent. They kept calling the bank to explain there had been a huge mistake but say no one would listen. They say they kept being harassed for money they did not owe.
A Chase spokeswoman said the bank is “deeply appreciative of those who fight to protect our country” and feels “particularly badly about the mistakes we made here.” (Read the bank’s full statement .)
The Rowles family is hardly the first  military family to have to fight against the banks and their handling of mortgages. Other lenders and servicers, including Aurora Loan Services  and OneWest Bank , have also made headlines in the past by foreclosing on military families or revoking offers of loan modifications.
Bloomberg noted in 2008 that in military towns, foreclosures were increasing at a rate almost four times the national average , despite the special protections given to military families.
(see full article for links to notes -- ed)
Why the Massachusetts Supreme Court Voided Two Foreclosures and What It Could Mean for Banks
by Marian Wang
When Massachusetts’ highest court ruled against U.S. Bank and Wells Fargo earlier this month and invalidated two foreclosures, the decision was hailed by some as an important precedent  for courts seeking to resolve foreclosure disputes.
While the decision’s impact isn’t entirely clear, even Wall Street analysts whodownplayed its applicability acknowledged its troubling implications for banks trying to foreclose with missing or insufficient documentation for the mortgage loans securitized and sold to investors.
The Massachusetts court, in its decision against the banks  [PDF], ruled that in two very similar foreclosure cases, neither bank had been able to prove that it had the right to foreclose on the homeowner due to an incomplete chain of title. In other words, the banks couldn’t prove they had legal standing to foreclose because the transfers of ownership weren’t properly documented each time the mortgage changed hands—or was assigned to a new party—during the securitization process...One of the issues is the so-called "mortgage in blank" procedure. In the Ibanez case, for instance, the last mortgage assignment with a full set of names on it is from Rose Mortgage to Option One. After that, the mortgage is assigned in blank throughout the securitisation. There’s no assignment with "US Bank" on it anywhere, though the bank did try to go back and finish off the assignment after it moved to foreclose.
Banks, in order to smooth over the problem of missing assignments, will often do “confirmatory assignments” after a foreclosure has been initiated. It’s standard practice in Massachusetts, FT Alphaville reported.
But these “confirmatory assignments” only work when “there is a prior valid assignment to confirm,” bankruptcy lawyer and foreclosure expert Max Gardner explained to me. Even though the lower court gave both banks time to produce evidence of earlier assignments, the banks weren’t able to cough up the proof.
They did, however, produce some securitization documents that the court said did not suffice as proof of legal standing in this case. U.S. Bank submitted the offering documents for the mortgage-backed security, which the court said showed an “intent to assign mortgages to U.S. Bank, not proof of their actual assignment.”
The court went on to say that even if the banks had produced a trust agreement or pooling and servicing agreement—proof that a mortgage pool was sold and assigned to the trust— they would still have to provide records detailed enough to show that the actual mortgage in question is contained in that mortgage pool.
The American Securitization Forum chose to take a glass-half-full approach to interpreting the ruling. It issued a statement  saying it was “pleased that the Court validated the use of the conveyance language in securitization documents as being sufficient to prove transfers of mortgages” under Massachusetts law.
(Georgetown University associate law professor Adam Levitin, meanwhile, looked at securitization documents for other mortgage securities and concluded that many would probably fall similarly short .)
Wall Street has nonetheless argued that the Massachusetts ruling was limited in scope. Paul Jablansky, an asset-backed securities strategist at the Royal Bank of Scotland, issued a report stating that “we do not believe that this case will be a broadly applicable landmark.”
That could be true. The ruling only has direct implications for foreclosures in Massachusetts, and state courts elsewhere could rule differently on a similar set of facts. That’s up to the courts to decide.
CNBC points out that the problems may be close to impossible  for the banks to fix. Take the Ibanez mortgage as an example—the chain of title was supposed to include assignments to and from Lehman Brothers, which collapsed in 2008:
Getting someone at Lehman to go through the process of executing the assignment is going to be very difficult. It’s not even clear if anyone at Lehman Brothers has the legal authority to execute an assignment now, while Lehman is bankrupt.
In any case, getting the assignment from Lehman wouldn’t really help you. You’d still have a gap in the chain from Option One to Lehman. It’s probably best to skip over Lehman all together and go directly to Option One to ask for the assignment.
But you have a bit of a problem. You didn’t buy the mortgage from Option One. They aren’t under any contractual obligation to you to execute any documents.
On top of that, the basic rules of securitization could be another obstacle for banks hoping to fix their mistakes by simply assigning mortgages years after the fact. The trusts were formed under tax rules passed in 1986 that gave them tax-exempt status so long as they “do not acquire any new assets  after the trust closes,” according to FT Alphaville.
If the trusts violate these rules, they could potentially be required to pay penalties, taxes and interest, Gardner told me—ultimately wiping out investors.
No one's sure what the Ibanez ruling will mean just yet, but one thing is clear: Foreclosing on mortgages that were securitized with insufficient documentation will continue to be tricky business for the banks.
(see full article for diagram of the chain of paperwork -- ed)
Bank Foreclosure Monitors Under Consideration by States in Industry Probe
By David McLaughlin and Sophia Pearson
A third-party monitor may be required as part of any settlement of a probe by 50 state attorneys general to ensure that banks comply with foreclosure practices, Connecticut Attorney General George Jepsen said.
A settlement should include a mechanism to supervise bank practices, Jepsen said yesterday in a phone interview. Jepsen, who succeeded Richard Blumenthal as attorney general, said the framework for any deal is months away. The third-party monitor could be a law firm, he said.
“It’s one of the many issues under discussion,” Jepsen said. Any such oversight could last a couple years, he said. “There’s going to be a need for some kind of process to make sure the banks do what they promise to do,” he said.
All 50 U.S. states are investigating foreclosure practices and pushing for banks and mortgage servicers to overhaul their procedures for seizing homes. The probe, announced in October, came after banks, including JPMorgan Chase & Co. and Bank of America Corp., stopped repossessions to review their foreclosure practices.
Geoff Greenwood, a spokesman for Iowa Attorney General Tom Miller, declined to comment. Miller is leading the 50-state investigation.
“We continue to work with Attorney General Miller to arrive at an industrywide multistate resolution,” Jumana Bauwens, a Bank of America spokeswoman, said in an e-mail.
Thomas Kelly, a JPMorgan spokesman, declined to comment.
Ally Financial Inc.’s GMAC Mortgage unit, which halted evictions in 23 states in September, said yesterday that it agreed to drop about 250 foreclosure cases in Maryland that were tied to defective affidavits.
GMAC made the decision in November to dismiss and re-file active foreclosure cases that could have been affected by flawed foreclosure affidavits, Gina Proia, a spokeswoman for Ally said in an e-mailed statement.
“We’re dismissing the cases but they will be re-filed,” Proia said. “The intention is to re-file the cases to go through the new foreclosure procedures in Maryland.”
GMAC’s decision comes after a Maryland nonprofit, Civil Justice Inc., agreed to drop a class-action lawsuit on behalf of homeowners whose foreclosure documents were signed by GMAC employee Jeffrey Stephan, Anthony DePastina, an attorney for Civil Justice, said in a phone interview. Stephan said in sworn depositions last year and in 2009 that he signed as many as 10,000 affidavits a month without checking their accuracy in a practice that has come to be known as “robo-signing.”
“Hopefully GMAC’s actions will set a precedent with other lenders where robo-signing has occurred,” DePastina said. “I think there will be a ripple effect throughout the country.”
DePastina said as many as 1,000 foreclosures may be tied to defective affidavits. Proia said that number is “factually inaccurate.”
“The company has been filing cases for dismissal and many have already been granted,” Proia said in an e-mail.