Daily Archives: November 6, 2015

NJ COUPLE FIGHT FORECLOSURE AGAINST BOFA AND CARRINGTON MORTGAGE IN FEDERAL COURT

Fed up with the slow pace – and what many people see as unjust actions — of foreclosures, some victims of the crisis are looking to go on the offensive, opt out of the New Jersey court system, and seek justice from federal courts.

Jerome and Sandra Barnes of Paterson are one couple who hope to outrace their mortgage-holder by filing a federal suit.

Like many others, the couple bought a house at the wrong time, in May 2008, just as the housing bubble was about to burst and the Great Recession about to take jobs. Their single-family home on a quiet street was close to Jerome Barnes’ job for the Saturn car company. With housing prices inflated at the time, it was also “the only area we could afford,” Sandra Barnes said.

First, Jerome lost his job when General Motors closed Saturn, but eventually he regained stable employment. The couple had fallen behind on their mortgage payments, but negotiated a modification. Even more fortunately, they were approved for a low-cost federal loan that covered their arrears.

But the Consumer Finance Protection Bureau has identified mortgages and foreclosures, including modification attempts, as a leading source of consumer complaints. All too predictably, New Jersey, which has the highest foreclosure rate in the country, is near the top of the bureau’s complaint statistics. The bureau’s reports are available online.

In describing the complaints , the CFB cited the sort of issues the Barnes cases raises: frequent “confusion and frustration” after mortgage loans are transferred among lenders; borrowers claiming lenders rejected or misapplied their payments, and lenders moving to foreclosure even while ostensibly reviewing modifications.

So it may not be surprising that the Barnes are going to court, claiming their mortgage servicer failed to properly credit a major payment and continues to charge more than agreed to in an approved modification. But their destination is uncommon among recipients of foreclosure notices in New Jersey: federal court. While widely discussed among attorneys during the surge of recession-related foreclosures, relatively few cases have left state courts. Federal jurisdiction is limited to cases that meet particular standards.

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Rather than wait for foreclosure proceedings, the Barnes have decided to take the offensive and have sued the Bank of America of Charlotte, NC, the current holder of their loan, and Carrington Mortgage Services of Anaheim, CA, its hired loan servicer, accusing them of violating federal debt collection and truth-in-lending laws.

Kaplan Stewart Meloff Reiter & Stein, the Pennsylvania firm that represents Carrington and Bank of America, has moved quickly to try to dismiss part of the Barnes suit. In her motion, attorney Sandhya Feltes argues that law and precedent show the two companies are not covered by the Truth in Lending Act in this instance because they did not originate or own the original mortgage.

Read on.

With Debt-Consolidation Business Morgan Drexen Shuttered, 84 Year Old Virginia Widow Takes on Lawyers

ALEXANDRIA, Va. (CN) – When Mary W. saw an advertisement for Morgan Drexen debt-consolidation services in November 2010, her circumstances had deteriorated considerably.
The death of her sister after a long illness had just forced Mary out of the home where they had been living together and into a small apartment that added rent to her concerns.
Getting by on less than $1,000 a month in Social Security and food stamps, Mary believed she needed help settling her debts. Though Mary was up to date on her monthly payments to creditors, the elderly widow owed $13,745.
“Mary was just trying to do the right thing,” Angela Ciolfi with the Legal Aid Justice Center said in an interview. “She wanted to keep up with her debts and saw the ad on TV of all the people saying they were debt-free and she believed their promises.”
Over the last five years, Morgan Drexen has faced several state investigationsand a federal action in California by the Consumer Financial Protection Bureau.
Now bankrupt, Morgan Drexen faces a permanent injunction in the CFPB case, put in place just this past June, barring the firm from collecting more fees from its debt-settlement customers.
The injunction came too late for Mary, now 84, who filed a federal complaint last week against the individuals and entities that she says deliberately acted against her “interests – and against the interests of their other putative ‘clients’ – to enrich themselves and a company based in Costa Mesa, California, called Morgan Drexen.”
Though she used her full name in the Oct. 30 federal complaint, Charlottesville-based Mary asked for anonymity when contacted for this article.
“During the nearly four years she paid Morgan Drexen and the network attorneys, [Mary] lived under austere conditions in which she could not always afford her medications or adequate nutrition, worried about her unresolved debts, was traumatized by being sued twice, and experienced deep distress about her financial condition overall,” the complaint states.

Read on.

Ex-Goldman banker barred from banking for leaking confidential Fed info

A former Goldman Sachs (GS) employee will never work in banking again, after pleading guilty to charges of stealing confidential information from the Federal Reserve Bank of New York.

On Thursday, the Fed permanently barred Rohit Bansal, who was able to obtain confidential information from the New York Fed because he was an employee of the New York Fed before going to work at Goldman Sachs, from working in banking as part of his guilty plea for misdemeanor theft of confidential information from the Federal Reserve.

Read on.

Fifth Third Appraisal Whistleblower Settlements

Mortgage News Daily:

And how ’bout that $85 million Fifth Third settlement last month involving an appraiser that ratted out, uh, blew the whistle on, his former employer? (It isn’t a stretch to forecast that tattle-tales, uh, whistleblowers, are a likely threat to those who remain in MSAs.) Snide comments aside, many believe that this type of activity levels the playing field for companies above reproach. Dave Gallegos sent along this story from Isaac Peck. “In what many see as a win for appraisers, as well as those lenders and appraisal management companies (AMCs) that do follow the law, Fifth Third Bank has agreed to pay nearly $85 million as part of a settlement with the U.S. Department of Justice (DOJ). The case deals primarily with fraudulent appraisal practices. The lead whistleblower in the case is George Mann, Fifth Third’s former chief appraiser.

“The settlement is the latest in a string of appraiser whistleblower lawsuits that highlight unethical and fraudulent practices that violate appraiser independence and perpetuate appraisal fraud. Mann follows in the footsteps of Kyle Lagow, of Countrywide, who received $14 million in a whistleblower case that led to a $1 billion settlementbetween Bank of America (BoA) and the DOJ, and Robert Madsen, who received $56 million for his part in a $16.65 billion settlement, also with BoA.

“Mann, and his co-claimant John Ferguson, will receive seven and one-half percent (7.5%) for their part in the Fifth Third suit as whistleblowers, which calculates to a tidy $6,368,326 before lawyers’ fees and taxes. The lawsuit was filed under the qui tam or whistleblower provisions of the False Claims Act, which allows private parties to sue on behalf of the United States when they believe a company has submitted false claims for government funds.

“…the suit alleges that fraudulent and misleading appraisals were used by Fifth Third to qualify for funding from the Troubled Asset Relief Fund (TARP), the Federal Deposit Insurance Corporation (FDIC), Fannie Mae, Freddie Mac, and other federal funding and securitization programs.

The practices described in the suit reflect the worst of the industry’s abuses, echoing the same issues that appraisers continue to encounter and speak out about today: pressure to meet value, unreasonable turn times and low fees. According to the suit: “From 2004 through today, loan officers instructed, coerced, and/or intimidated staff into obtaining appraisals at below-market fees and with unrealistically short delivery times, which resulted in questionable valuations. In addition, lenders used the same methods of intimidation to pressure REVG staff and/or appraisers into raising values so loan conditions could be met.”

“Of interest to many who read this settlement closely is the fact that John Ferguson was named as a co-claimant in the suit and received a portion of the $6.34 million whistleblower settlement, despite the fact that Ferguson never worked at Fifth Third Bank. Ferguson is a self-described ‘career whistleblower’ who initially filed a whistleblower lawsuit against Bank United in the early 2000s. While his whistleblower lawsuit was not successful due to Bank United declaring bankruptcy, Ferguson learned so much about the process that he decided to become a fulltime whistleblower, helping others build cases against big banks and other organizations that have defrauded the government.

Ultimately, the government decided to focus on residential lending, discovering that hundreds of FHA loans weretoo defective to qualify for FHA insurance. The $85 million settlement with Fifth Third compensates the government for over 1,400 loans that were insured through the FHA loan program and were discovered to be defective.

Linda J. Stengle, one of the attorneys representing Mann and Ferguson, encourages appraisers to step forward. “The False Claims Act, and to a lesser extent, the SEC whistleblower program, can really help protect qualified appraisers who are doing their jobs properly. Appraisers who are aware of large scale USPAP and FHA violations, for example, should investigate whether a whistleblower action will work for them.”

The article noted that, “Even inside the industry, appraisers are frequently blamed for going along with the widespread fraud that contributed to the real estate bubble and crash of the early 2000s. However, the Fifth Third settlement is a reminder that appraisers have often been on the frontlines in the fight against real estate and mortgage fraud. One expert noted that, ‘Appraisers are often bullied and pushed around. The whistleblower statute, which was reinforced under Dodd-Frank, gives appraisers some muscle to stand up to bullies.'”

New York Fed Chief Calls for Improved Wall Street Culture

A prominent Wall Street regulator on Thursday continued to press senior bankers to clean up the culture of their firms so that they can avoid the sort of recent scandals that have undermined the reputations of big banks.

William C. Dudley, the president of the Federal Reserve Bank of New York, told bankers who had gathered for a conference on ethical culture at the New York Fed, “I think your focus should be less on the search for bad apples and more on how to improve the apple barrels.”

Mr. Dudley started his push to improve banks’ culture two years ago with a speech that called the banks’ ethical lapses a “critical problem.” Skeptics have wondered whether the New York Fed has the authority or desire to do what it takes to change behavior on Wall Street. The New York Fed failed to address dangerous weaknesses in big banks before the 2008 financial crisis. And episodes since the crisis, like the so-called London Whale trading scandal at JPMorgan Chase, have raised questions about the effectiveness of its regulation.

Still, when it comes to culture Mr. Dudley appears to have made some progress. He has helped assemble an international effort to clean up the banks, under the Group of 30 nations, and on Thursday he had the support of Christine Lagarde, the managing director of the International Monetary Fund, and Stanley Fischer, the vice chairman of the Federal Reserve, both of whom were at the conference.

Read on.