Posts Tagged Fannie Mae

Bank of America Found Liable for Fraud Over Defective Mortgages Sold by Countrywide

After a four-week trial, a federal jury in New York found Bank of America liable on one civil fraud charge. Countrywide originated shoddy home loans in a process called “Hustle” and sold them to Fannie Mae and Freddie Mac, the government said.  The jury also found former Countrywide executive Rebecca Mairone liable on the one fraud charge she faced.

The U.S. Justice Department has said it would seek up to $848.2 million, the gross loss it said Fannie and Freddie suffered on the loans.  Any penalty would add to the more than $40 billion Bank of America has spent on disputes stemming from the 2008 financial crisis.

The lawsuit stemmed from a whistleblower case originally brought by Edward O’Donnell, a former Countrywide executive.  The case centered on a program called the “High Speed Swim Lane” – also called “HSSL” or “Hustle” – that government lawyers said Countrywide started in 2007.  The Justice Department contended that fraud and other defects were rampant in HSSL loans because Countrywide eliminated loan-quality checkpoints and paid employees based on loan volume and speed.  The Justice Department said the process was overseen by Mairone, a former chief operating officer of Countrywide’s Full Spectrum Lending division.

About 43 percent of the loans sold to the mortgage giants were materially defective, the government said.

The case is U.S. ex rel. O’Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, Case No. 12-01422.

While this case does not directly impact homeowners, I’m happy to see the government continuing to push to hold banks accountable for their role in the mortgage crisis.

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Dallas Foreclosure Defense Attorney stopped another lock-out by obtaining a Temporary Restraining Order in Tarrant County against Wells Fargo and Fannie Mae

The homeowner in Tarrant County, approached Dallas/ Fort Worth foreclosure defense attorney Meenu Seth, 20 hours before the lock-out was scheduled. Attorney Meenu Seth, partner at Duke Seth, PLLC, reviewed all the mortgage related documents, drafted a lawsuit, filed it with the court and obtained the Temporary Restraining Order (TRO) within the next four hours after the very first meeting with homeowner. In the lawsuit, attorney Seth challenged the authority of Wells Fargo to foreclose on homeowner and Fannie Mae’s right to possession. Ms. Seth argued that it was a wrongful foreclosure. If the foreclosure conducted by Wells Fargo is void, then Fannie Mae does not get the right of possession just by virtue of filing substitute trustee’s deed with the County Clerk. The Court, after listening to the arguments and reviewing the documents, granted the TRO. The TRO stopped Wells Fargo and Fannie Mae from evicting the homeowner from his property.

The homeowner is still in possession of his property and Ms. Seth has been approached by the attorneys for Wells Fargo and Fannie Mae to settle the case. The settlement discussions are on going.

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Fannie Mae Does the Right Thing for Once

Fannie Mae LetterI’ll have to admit, much of this blog reports and analyzes what the banks do wrong.  Well, I’m going to take a break from that theme and report on something that Fannie Mae actually did right.  This episode comes from my personal life and my personal home loan.

Recently, my wife and I refinanced our home to take advantage of the lower interest rates that are being offered these days.  While that was an exceedingly long and drawn out process (and I’m used to drawn out dealings with banks), it eventually got done.  Throughout the process, I fully expected my loan to get sold, transferred, assigned, and maybe even securitized.  I knew I had no control over this, and I expected to not even know who ended up with my note.

Man, was I surprised when I opened the mail yesterday.  I received a letter from Fannie Mae informing me that they had acquired my note.  Not the servicing rights, but the actual mortgage loan.  A huge smile came across my face.  Not that I was thrilled that Fannie Mae now owns my note–frankly, I don’t really care.  After all, both parties’ rights and obligations are clearly defined by contract.  I was just excited that a bank actually informed the homeowner–from the very beginning–about who owned their note.

If more banks had done this over the last 10 years, our country could have avoided a lot of the mortgage mess we’ve been slogging through.  Many of the disputes I deal with on a regular basis come down to a simple question:  who owns the note and is entitled to payments.  At least now I know who holds my note as of February 2013.  Does that mean that it won’t get sold or assigned again in the future?  No, and sending me a letter is not dispositive in court.  Transfer of a promissory note requires proper negotiation in compliance with the UCC’s requirements, not a simple notice letter.  However, it’s a good start.

I applaud Fannie Mae for letting me know it owns my mortgage loan.  I hope other companies are taking note and doing the same.

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The Fateful History of Fannie Mae

I love my work as a foreclosure defense attorney for two main reasons.  First, I get a lot of satisfaction out of helping hard-working families keep their homes.  It’s not always a success story, but when a family avoids losing their house to the bank, it’s a really good feeling.  The other reason I enjoy this area of law is that I find it intellectually fascinating.  Just a few short years ago, our country–our world–was on the bring of falling into the economic abyss.  It never ceases to amaze me at how a house in Las Vegas, Phoenix, Frisco, or a condo in Miami or Orange County could destroy our financial system.  Yes, I know how it happened, which is why I find this area of law so interesting.

In my opinion, any attorney who is working in foreclosure defense and is worth their salt should be at least an amateur historian in recent economic history.  At the heart of the housing bubble–and eventually the housing collapse–was Fannie Mae.  Fannie Mae is what’s known as a government sponsored entity, or GSE.  It’s an odd combination of a government entity and private corporation.  And it makes for a very interesting study.

If you’re interested in learning about the history of Fannie Mae, I would strongly recommend the book The Fateful History of Fannie Mae:  New Deal Birth to Mortgage Crisis Fall by author James R. Hagerty.  If you don’t want to commit to reading 224 pages on the subject, I would recommend the “Cliff Notes” version here, which is the video of a very interesting forum with the author and other leading experts on the history of Fannie Mae.  The video of the forum (which was put on by the American Enterprise Institute) appeared on C-SPAN’s Book Review and is 75 minutes well spent.

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Are Fannie Mae and Freddie Mac Encouraging Questionable Foreclosures?

CBNC is reporting that Congress is seeking information as to why Fannie Mae and Freddie Mac have charged “penalties” adding up to about $150 million for “failing to conduct foreclosures fast enough.”  Congressman Elijah Cummings, in an open letter to Fannie Mae and Freddie Mac, expressed serious concerns that these massive penalties may have contributed to widespread abuses by mortgage servicing companies and law firms attempting to meet arbitrary deadlines to expedite foreclosures.

As a foreclosure defense attorney, I have am troubled by these massive penalties.  Many foreclosure cases that I’ve handled have turned up glaring errors made by banks, servicers, and the lawyers who defend them.  In some instances, home loans are sold and assigned by parties who have no interest in them.  In most cases involving securitization of loans, there are blatant misrepresentations made either to the local county clerks where mortgages are publically recorded, or to the U.S. Securities and Exchange Commission, which regulates the securitization industry.  When I point out these mistakes to banks and their lawyers, I’m usually greeted with indifference or flat out denial.  Fannie Mae in particular, in my recent experience, has been especially resistant to working with homeowners.

Perhaps now I know why.  Servicers and foreclosure attorneys might rather face the wrath of the court for a wrongful foreclosure or an angry homeowner than a monetary penalty from Fannie Mae or Freddie Mac for not foreclosing fast enough.  After all, they can claim they “were just following orders” if they acted improperly.

This underscores my mantra to homeowners–take control of your own destiny.  Don’t assume that the bank or servicers, or their lawyers, are actually trying to help you keep your home–even if they are working with you on a modification.  As highlighted by the CNBC report, there may be another motive behind their actions–keeping up with a pre-set foreclosure pace to avoid fines and penalties.

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A Trick for Citibank and Fannie Mae, a Treat for Homeowners

Ok, I couldn’t help myself from putting up a Halloween-themed title today.  But it will definitely be a good night for a Fort Worth area couple who will get to stay in their home to hand out candy to trick-or-treaters.  A judge granted these North Texas homeowners’ application for temporary injunction, which orders Citibank/CitiMortgage and Fannie Mae to cease all efforts to evict the couple from their home while their lawsuit against Citi and Fannie Mae is ongoing.

The homeowners, represented by foreclosure defense attorney Walker M. Duke, filed suit in early 2011 seeking declarations that CitiMortgage had no interests or rights in their mortgage when it foreclosed on their home in October 2010, and that Fannie Mae’s purchase at the foreclosure sale was therefore void.  Following this foreclosure sale, Fannie Mae attempted on two separate occasions to evict the homeowners and have the constable remove their belongings. 

One side note–the homeowner that Citi and Fannie Mae tried to evict is a Vietnam veteran who has stage-4 cancer.  At least for today, the trick is on them.

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Federal Government Sues Major Banks Over Fannie Mae and Freddie Mac Losses

If you thought you, as a homeowner, were all alone in this battle against lenders, you’re not.  Federal regulators just recently launched a broad legal assault on big banks, claiming they sold nearly $200 billion in fraudulent mortgage investments to housing giants Fannie Mae and Freddie Mac that led to massive losses during the financial crisis.

The federal lawsuits, brought by the Federal Housing Finance Agency, named 17 domestic and foreign banks as defendants. Among them (click each bank name to see individual lawsuits against each bank): Bank of America, J.P. Morgan Chase, Goldman Sachs, Morgan Stanley, Citigroup and Deutsche Bank.  According to the court filings, those firms and others “falsely represented” the quality of the loans that were bundled into securities and sold to investors and “significantly overstated the ability of the borrower to repay their mortgage loans.” The result, the suits claim, were investments that were far riskier than the banks led taxpayer-backed Fannie Mae and Freddie Mac to believe, and the securities ultimately were worth a fraction of their original value.

In my opinion, these lawsuits by the federal government against the banks are significant for two reasons.  The first shows what a mess we’re in–the government is now suing the very banks that it bailed out to the tune of hundreds of billions of dollars just a few short years ago.  I understand the reason why (and I’m sure politics had a lot to do with it), but it seems a counter-productive to sue the very entity you’re trying to help.

The second reason that I believe these suits are significant is that, according to the allegations, it shows just how little you can trust these banks.  They were receiving a massive handout from the government–a lifeline that kept the financial system from collapsing–and they still tried to push off a pile of junk onto Uncle Sam.  It reminds me of the old Life cereal commercial where the kids don’t want their breakfast and push it off to Mikey because he’s the younger brother and won’t object.  Well, according to this lawsuit, these banks didn’t want their breakfast, i.e. the bad loans they made, so they simply slid them down the table for the U.S. taxpayer to eat.

If these firms are willing to bite the hand that feeds them–literally, the hand that saved these institutions from suffering the same fate as Bear Stearns and Lehman Brothers–just imagine what they’re willing to do to you.  If a multi-billion dollar bailout from the federal government doesn’t keep them in line, what odds do you think you have with your $100,000, $200,000, or $300,000 mortgage?

Now, I’m not saying that everything that lenders do is wrong or in bad faith.  After all, they have made many, many loans and helped a lot of families live the American dream.  However, what I am saying is that you shouldn’t count on your lender to work in your best interest, particularly if you are struggling with your mortgage.  As we’ve preached on this blog many times, you have to look out for yourself.  Don’t count on representations made over the phone with the “call center in India.”  If you think you have a workout agreement, modification, or loan forbearance with your lender, GET IT IN WRITING!!!  Without more, you will most likely not be able to enforce some representation made over the phone by a call center operator (who doesn’t know anything more about your loan than what’s pulled up on their computer screen).

Uncle Sam has taken matters into their own hands by pursuing legal action against the banks.  Say what you will about the propriety of suing the entities they bailed out, but the federal government has gone on the offense to protect their interests.  Homeowners should do the same.

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