Reprint from Motley Fool on Foreclosure Crisis

The Weekly Walk of Shame: Blaming "Deadbeat" Homeowners for Foreclosure Fraud (Click on the title to this post to read the original article.)

By Ilan Moscovitz | More Articles
November 2, 2010 | Comments (20)

Jump into the Fool’s FREE new service today.
Click Here Now
This Motley Fool series examines things that just aren't right in the world of finance and investing. Here's what's got us riled up this week. If something's bugging you, too, go ahead and unload in the comments section below.

Today's subject
Foreclosure fraud is heating up. While bankruptcy judges have chastised Wall Street's lacksidaisical approach to recordkeeping and fabrication of court documents at least as far back as 1999, the foreclosure wave sweeping America has provided a new venue for lawbreaking.

Wall Street has characterized the fraud epidemic as a mere paperwork issue. Various journalists have echoed and expounded the party line, laying the blame thick on "deadbeat " homeowners.

Here's The Wall Street Journal editorial team:

Talk about a financial scandal. A consumer borrows money to buy a house, doesn't make the mortgage payments, and then loses the house in foreclosure -- only to learn that the wrong guy at the bank signed the foreclosure paperwork. Can you imagine ...? Welcome to Washington's financial crisis of the week ...

We're not aware of a single case so far of a substantive error. Out of tens of thousands of potentially affected borrowers, we're still waiting for the first victim claiming that he was current on his mortgage when the bank seized the home.
Umm ...

Bank of America (NYSE: BAC) foreclosed on a Fort Lauderdale home that didn't even have a mortgage .
A terrified Orlando woman for whom foreclosure proceedings had not begun dialed 911 when JPMorgan (NYSE: JPM) contractors attempted to break into her home.
On Wednesday The New York times reported that Deutsche Bank tried to foreclose on a Michigan house that was paid for in cash, a Kentucky couple was foreclosed on by a trust that did not exist, and a Colorado woman is facing foreclosure after her bank told her to skip a payment as compensation after it mistakenly changed her locks.
My favorite: Wells Fargo (NYSE: WFC) hired a law firm to foreclose on a condo owned by ... Wells Fargo. The bank then hired a separate legal team to defend itself. As business reporter Al Lewis is quoted, "You can't expect a bank that is dumb enough to sue itself to know why it is suing itself."
And the list goes on. Wells Fargo alone has found documentation "lapses" in 55,000 current cases, and there's no reason to think they are special among mortgage servicers.
Why you should be indignant
As Cleveland Federal District Court Judge Christopher Boyko wrote in 2007:

Plaintiff's "Judge, you just don't understand how things work" argument reveals a condescending mind-set and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.
It's galling when Wall Street institutions that were bailed out by the public in 2008 still feel they can rip off consumers and investors because they're above the law.

So here's the fraud: In order to foreclose on a house, you need to have the note, the IOU that identifies which homeowner owes money to whom.

But during the housing securitization bonanza, as mortgages were issued, sliced and diced, and traded left-and-right, sketchy mortgage originators appear to have cut corners by failing to supply notes to mortgage-backed security trusts. According to the CEO of a major subprime lender, "We never transferred the paper. No one in the industry transferred the paper."

Many of these contracts were also destroyed -- banking executives told a Florida court in 2009 that it was standard practice to shred them.

Now that Wall Street is without the notes, it may be unclear in many cases who owes money to whom. As law professor Catherine Porter testified yesterday before the Congressional Oversight Panel:

If the trust does not have the loan, homeowners may have been making payments to the wrong party. If the trust does not have the note or mortgage, it may not have standing to foreclose.
Now, Wall Street could agree to negotiate with more homeowners to restructure their loans in an affordable manner, as is common in the corporate world. Or we could create a process that would allow mortgage debt relief to be included in personal bankruptcy proceedings, as Blackrock's (NYSE: BLK) Vice Chairman recently argued we should. Such moves would help to clean up consumer debt and move the housing and economic recoveries forward.

They might even be welcomed by investors like PIMCO, Blackrock, Legg Mason's (NYSE: LM) Western Asset Management, Annaly Capital (NYSE: NLY)-managed Chimera (NYSE: CIM ), taxpayers (via the New York Fed and Freddie Mac), the investors who actually own the mortgages, since foreclosure can be a costly process for them too. (That group, minus Chimera, recently notified Countrywide they were displeased with how it was servicing their investments in mortgage-backed securities.)

But Wall Street, which collects late payment fees and additional fees during foreclosure, has instead resorted to hiring companies to "recover" the documents and paying notaries to "robo-sign" themselves hundreds of times daily. They're even charging investors for the robo-signing tab.

What now?
Honestly, no one knows the full scale of the fraud. But it could be big -- all 50 state attorneys general are investigating. I'll be writing more on the potential fallout this crisis could have on Wall Street and the $2.8 trillion residential mortgage-backed securities market.

This doesn't appear to be a mere "paperwork issue" – we seem to be dealing with bullying and lawbreaking.

The Journal editorial team, whose "About Us" page congratulates itself on "stand[ing] for free trade and sound money; against confiscatory taxation and the ukases of kings and other collectivists; and for individual autonomy against dictators [and] bullies," seems to feel that government is inherently evil, whereas corporate violations of individual rights isn't a major concern.

But sometimes we need laws, regulators, and courts to enforce contracts and protect individuals from corporate bullying. Illegally seizing property or seizing the wrong property, failing to live up to contractual obligations to investors, and lying in court is, yes, illegal -- even when Wall Street does it.

As the facts come out, they are painting a picture of institutional stupidity and greed by Wall Street. Again. This is something that should come as no surprise to Fools. When Wall Street breaks the law and journalists won't let the facts interrupt their prejudged narratives about "deadbeats," it's not surprising -- but it's certainly shameful.

If you'd like me to keep you updated on financial reform and shareholder rights, just shoot a blank email to imoscovitz@fool.com.

Closed for 365 days – opening Tuesday, November 16! – Motley Fool Million Dollar Portfolio is by invitation only. To receive your personal invitation, and access 'Motley Fool Top Picks & Portfolio Perspectives 2011' -- the FREE video and live chat series featuring top stock picks from Fool advisors, and closely guarded portfolio secrets from Million Dollar Portfolio advisor Ron Gross… simply enter email below:

Ilan Moscovitz doesn't own shares of any company mentioned. BlackRock is a Motley Fool Inside Value selection. The Motley Fool owns shares of Annaly Capital and Legg Mason. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

See www.Axsmith.net for solutions in Washington, DC area.

FORECLOSURE: FIGHTING BACK AFTER THE SALE

WITNESS VERIFIES ADMISSION OF ILLEGAL FORECLOSURE BY BANK OF AMERICA


A new legal tool in the foreclosure crisis is suing for wrongful foreclosure. Jacqueline Horton’s condo was illegally foreclosed on by Bank of America and her property sold at auction July 7, 2010. On September 9, 2010, she hired Axsmith Law to fight back and is suing for $3,508,500.00 under DC law.

Ms. Horton is suing Bank of America for not only illegally foreclosing and selling her property, but then buying it in a directly self-dealing transaction. While it is common practice for banks to buy properties they have illegally foreclosed on, it is also fraud. Axsmith Law intends to attack this fraudulent scheme.

When Bank of America sent Jacqueline Horton a letter with a phone number on it, she expected it to be correct. When that phone number was given as a source of information about her mortgage loan, she expected the information given to also be correct. It wasn’t. Her home was foreclosed on illegally by Bank of America while she was told to not take legal action because the foreclosure process was put on hold. She lost her home as a result and faces homelessness for her and her children. And we’ve got a witness: DC Housing Counseling Services, 2410 17th Street NW, Suite 100, Washington, DC 20009.

Christine Axsmith, Esq.
Axsmith Law
Axsmith.net

202-285-5415

Illegal Foreclosure and What You Can Do About It

If you have been illegally foreclosed on, you have options under DC Law. In fact, there are cases that uphold several million dollars in punitive damages for an illegal foreclosure.

You don't have to take this. Don't. Call a reputable law firm, one with experience and a history of success and fighting the big guy on behalf of the little guyl to get the help you need.

Axsmith Law has been representing homeowners in the field of foreclosure defense and illegal foreclosure since the crisis began.

www.axsmith.net
www.cnn.com
www.washingtonpost.com
www.huffingtonpost.net
www.foreclosure.com
Wikipedia on Foreclosure
HUD Foreclosure Prevention Programs
Foreclosure Houses - Get Your Name Off This List!
Foreclosure Misc
www.washingtonpost.com
www.huffingtonpost.net
www.foreclosure.com
Wikipedia on Foreclosure
HUD Foreclosure Prevention Programs
Foreclosure Houses - Get Your Name Off This List!
Foreclosure Misc

Don't Sell Stocks!!

You only lose money if you sell stocks. You haven't really lost money unless you sell your stocks. So if you can, don't sell your stocks. Hang in there as long as you can. I know it's scary, but the people who make money, serious money, are not selling or are even buying stocks.

Fannie Mae Forgives Loan of Woman Who Shot Herself

The woman was ninety years old. Now you know what's going to happen. People all over America are going to shoot themselves when the sheriff comes to evict them.

What is not being taken into account is the human toll of misery resulting from the credit crisis.

And the American people were lulled into the credit lifestyle to support, falsely, the economy.

Two Hundred Houses for Sale in Petworth

The decline and fall of real estate investors is a boon to anybody looking to buy a house for the price of a condo.

The Petworth market is taking a real hit right now because of the foreclosures. There are about two hundred of them. But keep in mind the huge mall that is opening at 14th & Irving is going to have a cascading uplift to properties north of Columbia Heights. And the huge redevelopment of Georgia Avenue and Sherman Avenue from Howard University to the Georgia Avenue Green Line stop will only enhance that.

Check it out! The lawns are nice and you can still own a home for less than the price of a condo. And that includes a yard. Any Realtor should be able to help you locate something.