Borrowers: 1, Banks: 0

According to an article in the Wall Street Journal (Banks hit foreclosure hurdle, 6/1/11), courts are increasingly ruling in the favor of homeowners who claim the “show me the paper” defense to foreclosure.  For instance, this case against our very favorite bank, Chase:

In March, an Alabama court said J.P. Morgan Chase & Co. couldn’t foreclose on Phyllis Horace, a delinquent homeowner in Phenix City, Ala., because her loan hadn’t been properly assigned to its owners—a trust that represents investors—when it was securitized by Bear Stearns Cos. The mortgage assignment showed that the loan hadn’t been transferred to the trust from the subprime lender that originated it.

Specific deal agreements required Bear Stearns to assign the loan within three months of the securitization. Because it failed to do so, Alabama Circuit Court Judge Albert Johnson determined, the trust didn’t own the mortgage. “The court is surprised to the point of astonishment that the defendant trust did not comply with the terms,” of the securitization agreement, he wrote.

The ruling is one of the first in the nation to strip a mortgage trust of an asset it thought it owned. A similar case earlier this year was decided in the bank’s favor when it held that the borrower wasn’t a party to the securitization agreement.

Nick Wooten, the lawyer for Ms. Horace, says the case won’t necessarily influence other decisions unless it is upheld by a higher court. But he says it is “another brick in the wall of trial-court-level cases that clearly show the wheels fell off the bus in the securitization industry during the bubble.”

Apparently Chase knows it can’t win this one

J.P. Morgan Chase hasn’t appealed the case. A bank spokesman declined to comment.

This might be a good time to start asking Chase to prove they have the authority to foreclose on you.

Don’t give Chase documentation they don’t have!

There has been a lot of speculation as to exactly how much documentation Chase (and other banks) have lost on the original mortgages and subsequent ownership transfers that have created a legal quagmire (and liability) they are experiencing with proving authority to foreclose.

Well, hints come from many places and today’s comes courtesy of a commentor on our blog:

I just had a Chase representative tell me that I had to send in a copy of my recorded mortgage or they wouldn’t process my HAMP request. I’m not about to hand them documents that they would just use to take my house! This company is something…

A wise choice indeed.  Don’t give Chase documentation they may have lost and without which they can’t foreclose on you.  Be wary of signing anything that reaffirms their ownership of your mortgage or authority over it (if they are only the servicer, not the owner) if they can’t otherwise prove it.  Better yet, ask them for proof of their authority over your loan before agreeing to anything.  If they can’t provide it, ask them for better terms to your loan modification.

Yes, I realize these are very simple and potentially naive suggestions, but the truth is that no-one knows what might work given the documentation uncertainty the banks have today.  One thing that is sure, they know they have a problem.

60 Minutes story on forging of foreclosure documents by banks

60 Minutes did a segment on the forging of documents (that were most likely lost) by banks pursuing foreclosures.  This is a huge story and could potentially affect tens of thousands, hundreds of thousands, or millions of homeowners that have been foreclosed upon or are threatened with foreclosure.

As more and more Americans face mortgage foreclosure, banks’ crucial ownership documents for the properties are often unclear and are sometimes even bogus, a condition that’s causing lawsuits and hampering an already weak housing market. Scott Pelley reports.

You an watch the video here and read the associated CBS story here.

At issue here is that banks, in their brilliant move to electronic system called MERS to record changes in ownership of mortgages as they were sliced, diced, and sold as securities, either lost or destroyed the original mortgage and change of ownership documents.  They did this to avoid having to file paperwork with county clerks every time some part of a mortgage changed hands, saving them millions.

But it turns out that filing with county clerks is a legal requirement and courts have begun to reject MERS filings as proof of mortgage ownership. So what did banks do?  According to this story, they started to forge the original documents.

If any of the loan documents provided to you by your bank or mortgage servicing company are signed by Linda Green, they are likely fraudulent.

What if everyone protested what they didn’t think was right?

Here is a story from a local paper about a man protesting his foreclosure by Chase Bank.

Homeowner fights bank foreclosure

Daily Post, February 12th, 2011

After picketing outside a Palo Alto Chase Bank yesterday, a man has a second chance at getting his home out of foreclosure.

James Adams, 63, of La Honda. picketed outside the Chase at 2846 Middlefield Road in Midtown Palo Alto at noon yesterday. He also picketed outside the Chase at 2300 Broadway in Redwood City on Wednesday.

His home for decades

Adams told the Post yesterday that he discovered on Dec. 20 that the bank foreclosed on his home of more than 34 years after he worked for months to get a loan modification.

“It’s a real common story – there is a corporate culture of greed and lying,” said Adams.

Falling behind

Adams said he’d been paying the principal interest on his loan, but fell behind on his payments in 2008 because he developed arthritis in his knees.  He added that work had also dried up for his woodworking business at about the same time.

Chase called Adams later in the afternoon and gave him a second chance to modify his loan, said Chase spokeswoman Eileen Leveckis. She said it wasn’t because of his protest, adding the bank had been in contact with him since Monday working on the modification.

Did it work?

“Do 1 think my protest had an effect on Chase? You bet!” said Adams in an e-mail to the Post. Nevertheless, Leveckis said there’s hope for Adams with the second loan modification.

This is yet another example where Chase has proven to be media sensitive to its bad acts.  Your single best chance in getting Chase to stop whatever bad behavior it is doing, is to get someone in the press to notice.  I wouldn’t be surprised if someone inside the Chase branches where Adams was protesting noticed media presence and contacted their superiors.

What if a much larger percentage of people that Chase has abused were to protest like this?  I’ll bet it just might actually make abusing customers less profitable for Chase.

Chase admits morgtage unit broken, appoints new chief

JPMorgan Names New Head for Mortgage Business

Hoping to troubleshoot some of the problems plaguing its mortgage operations, Jamie Dimon on Friday dispatched one of his top lieutenants to oversee the Chase Home Lending business.

Frank Bisignano, JPMorgan Chase’s chief administrative officer, will now add supervising the Chase’s mortgage origination and loan payment collection businesses to his duties managing many activities, like technology and real estate, for the bank. David Lowman, the current head of Chase Home Lending, will retain his title but now report to Mr. Bisignano.

Read more …

Chase’s compassion department

To characterize just how far Chase has come from being personal as a banking institution (you know, what banks used to be like), they are trying to foreclose on the home of a woman whose husband was killed trying to sell jewelry over Craigslist to be able to make their mortgage payments.

Nice going Chase.

Is Chase missing documentation on ALL WaMu loans?

Just received this from a reader:

I talked with an insider at the FDIC and there’s STRONG indication that Chase does NOT have the original (paper) promissory notes and contracts to prove that it owns the $176 billion in loans that it bought from Washington Mutual for little more than 1% of the face value (they bought it for $1.88 billion and get to keep all our payments though they never loaned out that money originally and likely bought WaMu with our taxpayer TARP funds!).

The FDIC swooped in to minimize its own insurance costs…they shut down WaMu in ONE day and sold it to Chase for even cheaper than Chase’s cheapest offer to WaMu while WaMu was functioning. WaMu wasn’t allowed to receive bailout money, it was closed just 9 days before the TARP funds were given to Chase. As of nearly 2 years later, August 2010, Chase still hadn’t “completed” its purchase of WaMu yet has been collecting and enforcing those $176 billion in loans.

The FDIC also never SPECIFICALLY assigned any of the loan inventory to Chase. This means Chase has no specific proof that your loan belongs to it. Chase doesn’t have the original paper note (it was likely shredded and they only kept digital copies) and it likely doesn’t have any ASSIGNMENT CONTRACT proving that it owns your loan either. Since the FDIC sells off different assets piecemeal to different buyers, Chase wants us to believe that Chase bought everything at once, but there is no specific proof since the individual loans were never separately assigned/sold/inventoried. Chase might be trying to retroactively fake that documentation now, and they might just get away with it.

Chase begins charging WaMu customers who had “free for life” checking accounts $10/month now starting Feb 8th, 2011.

LET’S DO A RUN ON THE BANK and take out all our deposits on February 6-7, 2011 to MAKE THE POINT that Chase can’t keep our business with these tactics.

WaMu had only 9% of its deposits removed before the FDIC shut it down in ONE day (September 25, 2008). What if we get everyone we know with a Chase account to withdraw our deposits at the same time? If it exceeds 9% of Chase’s deposits, let’s see what the FDIC does and call their bluff on whether or not they legitimately shut down WaMu in the first place if they don’t do it again for Chase!

Chase representatives at high levels are aware of fraud in the origination of the WaMu loans but continues to deny fraud through its fraud department (no ethical conflict of interest there, right?) to keep customers paying, even though they DON’T HAVE THE PAPER PROMISSORY NOTES OR ASSIGNMENT CONTRACTS to prove that they have standing to enforce these $176 billion in loans through the courts. They are counting on customers being too scared to stop paying and get sued.

How can we get the word out as quickly as possible regarding withdrawing all our money from Chase by Feb 6-7, 2011? With smaller deposits, Chase won’t be allowed to make exponential new loans (for each $1 we have on deposit with them they can borrow 7x-10x from the Federal Reserve to loan right back to us at higher rates than what they’re paying on our savings and CD accounts, so withdrawing our money will have 7x-10x the exponential effect on Chase’s future business.)

Can you help me tweet this? I don’t have the following that you do to make this happen in time. Thank you!

There are a number of other indications that Chase is having trouble proving ownership of loans, including

1. A number of cases where it could not prove ownership and lost its foreclosure battle in court
2. The sending of unsolicited loan modifications to customers who are not behind on their payments. This could be a thinly veiled attempt to get them to resign loan documents to re-establish the document chain.
3. The explicit attempts to get customers to resign mortgage paperwork.

Given all these other indications we see that Chase is having trouble proving ownership of loans, it seems entirely plausible that Chase might have such a big hole in their loan documentation.

Chase looses yet another foreclosure case in court

Chase has lost another foreclosure case in court because it was unable to produce the original promissory note.

A Florida couple is staying in their home because the bank holding their mortgage could not prove they owed them any money.

According to a report at Ocala.com, the Reddick, Fla., couple admitted in court that it owed its bank money on their home mortgage. The bank in the case pursued foreclosure proceedings against them in an attempt to reclaim the home.

However, this Florida couple, like thousands of other homeowners across the country, had their foreclosure documents filed in court through the robo-filing process. Robo-filers were employed by the nation’s biggest banks and largest home-loan lenders to quickly file foreclosure proceedings against tens of thousands of homeowners who’d fallen behind on payments.

For Phillip and Viva Evans, they had fallen nearly a half-million dollars behind on their home payments and Chase Finance filed foreclosure documents. The Evans’ challenged the foreclosure process in court and when it came time for Chase to provide proof of the loan, it was learned they had lost the original promissory note.