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    A REVIEW OF THE FORECLOSURE FRAUD REVIEW

    A REVIEW OF THE FORECLOSURE FRAUD REVIEW

     

    The Federal Reserve System, Office of the Comptroller of the Currency and Office of Thrift Supervision conducted foreclosure-processing reviews at Ally Bank/GMAC, Aurora Bank, Bank of America, Citibank, EverBank, HSBC, JPMorgan Chase, MetLife, OneWest, PNC, Sovereign Bank, SunTrust, U.S. Bank, and Wells Fargo.

     

    NOT SURE WHY SOME NOTORIOUS SERVICERS ARE MISSING – AHMSI, OCWEN, to name a few.

     

    The investigation included the interrelated service providers, foreclosure attorneys, Lender Processing Services (LPS) and other default-service providers, MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (MERS).

     

    HAVEN’T HEARD A PEEP ABOUT ACTIONS AGAINST ANY FORECLOSURE ATTORNEYS, HAVE YOU?

     

    The reviews were very limited and still found critical weaknesses in servicers’ foreclosure governance processes, foreclosure document preparation processes, and oversight and monitoring of third-party vendors, including foreclosure attorneys. 

     

    LOTS OF NICE WORDS FOR FRAUD.

     

    It was determined that the servicers engaged in unsafe and unsound practices and violations of applicable federal and state law and requirements.

     

    OR FRAUD.

     

    They determined that the problems had widespread consequences for the national housing market and borrowers.

     

    YET STILL NO ADMISSION OF FRAUD, AND APPROPRIATE REMEDIATION FOR FRAUD IN FAVOR OF THE HOMEOWNERS. They claim that the reviews showed that servicers possessed original notes and mortgages and, therefore, had sufficient documentation available to demonstrate authority to foreclose. REALLY, why then did they fail to produce the proper documentation most of the time? Did the examiners ask them that question?

     

     

    Further, examiners found evidence that servicers generally attempted to contact distressed borrowers prior to initiating the foreclosure process to pursue loss-mitigation alternatives, including loan modifications.

     

    REALLY HOW DID THEY DETERMINE THAT? DID THEY CONSULT WITH THE HOMEOWNERS? DID THEY FIND THE MOUNTAIN OF LOAN MOD APPLICATIONS THAT SEEM TO GET LOST IN THE CUSTODY OF THE SERVICERS?  DID THEY GO TO INDIA??

     

    However, examiners did note cases in which foreclosures should not have proceeded due to

    an intervening event or condition, such as the borrower (a) was covered by the Servicemembers Civil Relief Act, (b) filed for bankruptcy shortly before the foreclosure action, or (c) qualified for or was paying in accordance with a trial modification. 

     

    AND DID THEY INSIST THAT THEY CALL THOSE BORROWERS RIGHT AWAY TO MAKE THEM WHOLE?

     

    Examiners found that notes appeared properly endorsed, and mortgages appeared properly assigned.

     

    REALLY, WELL I GUESS ALL THOSE FRAUD ASSIGNMENTS FOUND BY LYNN SZYMONIAK WERE JUST A FLUKE, HUH?  WHY DID SHE GET 18 MILLION AGAIN? WHY DID THE BANKS SETTLE FOR 26 BILLION?

     

    Examiners also traveled to servicers’ document repository locations to assess custodial activities.

     

    WELL THEY WENT TO A BUILDING AND SAW BOXES OF DOCUMENTS AND SAID, YEAH IT LOOKS LIKE THEY HAVE SOME FILES. ALRIGHTY THEN, CASE CLOSED.

    Examiners found that servicers generally had possession and control over critical loan documents such as the promissory notes and mortgages.

     

    SO LET ME GET THIS STRAIGHT, ALL WAS AS IT SHOULD BE? WHY DID THEY SIGN THE SETTLEMENT AGREEMENT?

     

    The review did find that, in some cases prior to 2010, the third-party law firms hired by the

    servicers were nonetheless filing lost-note affidavits or mortgage foreclosure complaints in which they claimed that the mortgage note had either been lost or destroyed, even though proper documentation existed. 

     

    AND WHY WOULD THEY DO THAT? WHAT LAW FIRMS WAS THAT? ARE THEY BEING PROSECUTED OR INVESTIGATED FURTHER?

     

    Servicers frequently maintained custody of original mortgage documents, although in some cases third-party trustees or custodians held original documents. Custodians are entrusted to manage the original documents that establish note ownership, and, when necessary, produce the original documents for a foreclosure action.

     

     

    Only in rare instances were custodians unable to produce original loan documentation, and in those instances the servicers generally were able to provide adequate explanations, including

    that copies in the possession of the custodian were acceptable under applicable law.

     

    OKAY DOKEY, WHAT IS THIS ALL ABOUT THEN?? WOULD SOMEONE PLEASE CLUE ME IN.?

     

    AND THERE’S MERS

     

    In connection with the on-site reviews of servicers, the agencies, together with the Federal Housing Finance Agency (FHFA), also conducted an on-site review of MERSCORP and its wholly owned subsidiary, Mortgage Electronic Registration Systems, Inc. (collectively MERS), which, as detailed below, provides significant services to support mortgage servicing and foreclosure processing across the industry.

     

    The review of MERS involved a number of issues that are similar to those raised in the reviews of the servicers, and the MERS review covered issues that are unique to the operations, structure and corporate governance of MERS.

     

    During the review of MERS, the agencies and FHFA found significant weaknesses in, among other things, oversight, management supervision and corporate governance.

     

    OKAY, LET ME EXPLAIN, MERS HAD NO OVERSIGHT, LET MORONS BE CORPORATE OFFICERS, AND HAD NO IDEA WHAT ITS MEMBERS ENTERED INTO ITS DATABASE OF RECORDS. THE MEMBERS ENTER THE INFORMATION, NOT MERS.

     

    MERS streamlines the mortgage recording and assignment process in two ways. First, it operates a centralized computer database or registry of mortgages that tracks the servicing rights and the beneficial ownership of the mortgage note. Each mortgage registered in the database is assigned a Mortgage Identification Number (MIN).  

     

    MERS CAN HIDE THE TRUE OWNER OF THE NOTE.

     

    Second, MERS can be designated by a member (and its subsequent assignees) to serve in a nominee capacity as the mortgagee of record in public land records. Designating MERS as the mortgagee is intended to eliminate the need to prepare and record successive assignments of mortgages each time ownership of a mortgage is transferred. Rather, changes in beneficial ownership of the mortgage note (and servicing rights) are tracked in the MERS registry using theMIN.18 All of the examined servicers had relationships with MERS. 

     

    MERS CAN STEAL REVENUE FROM THE COUNTY FOR RECORDATION TAX. IF YOU AND I DEVISED A PLAN TO STEAL REVENUE FROM OUR COUNTY OR STATE, WHAT JAIL WOULD WE BE IN?

     

     

     

    Inadequate Oversight

    Servicers exercised varying levels of oversight of the MERS relationship, but none to a sufficient degree. Several of the servicers did not include MERS in their vendor management programs. In these instances, the servicers failed to conduct appropriate due diligence assessments and failed to monitor, evaluate, and appropriately manage the MERS contractual relationship. Deficiencies included failure to assess the internal control processes at MERS, failure to ensure the accuracy of servicing transfers, and failure to ensure that servicers’ records matched MERS’ records.

     

    IN SUM, SERVICERS AND MERS HAD NO IDEA IF ANYTHING ON THE MERS SYSTEM WAS CORRECT. 

     

    Inadequate Quality Control

    Examiners also determined that servicers’ quality control processes pertaining to MERS were insufficient. In some cases, servicers lacked any quality assurance processes and relied instead on the infrequent and limited audits that MERS periodically conducted. Other deficiencies included the failure to conduct audit reviews to independently verify the adequacy of and adherence to quality-assurance processes by MERS, and the need for more frequent and

    complete reconciliation between the servicers’ systems and the MERS registry. Several servicers did not include MERS activities in the scope of their audit coverage.

     

    TO UNDERSTAND THE MERS SYSTEM IS TO UNDERSTAND THAT NO ONE REALLY GAVE A RATS ASS IF THE MERS DATA WAS CORRECT. IT IS A SHAM DESIGNED TO EVADE FEES FOR LOAN TRANSFERS, AND TO HIDE THE TRUE OWNERS OF THE NOTE, NOTHING MORE.

     

    The Audit found weaknesses in quality-control procedures at all servicers, which resulted in servicers not performing one or more of the following functions at a satisfactory level:

    1)      ensuring accurate foreclosure documentation, including documentation pertaining to the fees assessed;

    2)      incorporating mortgage-servicing activities into the servicers’ loan-level monitoring, testing, and validation programs;

    3)      evaluating and testing compliance with applicable laws and regulations, court orders, pooling and servicing agreements, and similar contractual arrangements; and

    4)      ensuring proper controls to prevent foreclosures when intervening events or conditions occur that warrant stopping the foreclosure process (e.g., bankruptcy proceedings, applicability of the Servicemembers Civil Relief Act, or adherence to a trial or permanent loan modification program).

     

    Moreover, failure to conduct comprehensive audits to identify weaknesses in foreclosure processes resulted in servicers not taking sufficient corrective action to strengthen policy and

    procedural gaps, increase staffing levels, and improve training in response to sharply rising foreclosure volumes prior to the agencies’ foreclosure reviews. The failure to identify the risks associated with foreclosure processing also resulted in servicers not taking action to improve foreclosure documentation-related processes ranging from custody and control of documents

    to proper notarization processes, or to enhance oversight of third parties managing foreclosure

    activities on their behalf.

    IS IT REALLY A SURPRISE THAT THE SERVICERS DIDN’T GIVE A RATS ASS HOW SCREWED UP THEIR PROCESSES WERE. JUST GET THE HOUSE DAMN IT, AS FAST AS YOU CAN WAS THE MANTRA THEY LIVED BY.

    IN CONCLUSION, I FIND IT IRONIC THAT IMMEDIATELY FOLLOWING THE MERS SECTION OF THE REPORT; A PAGE WAS INTENTIONALLY LEFT BLANK. WAS THIS PAGE OF INFORMATION REDACTED INFORMATION THAT THEY DID NOT WANT US TO SEE RELATING TO MERS?

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