Wednesday, February 20, 2013

National Mortgage Settlement & CFPB Monitoring of Loan Transfers

National Mortgage Settlement and the Consumer Financial Protection Bureau's Monitoring of Loan Transfers

Are National Mortgage Settlement defendants transferring mortgage loans to other servicers in an attempt to avoid their obligations under the NMS?

As an attorney who represents mortgage loan borrowers and homeowners, I am sensitive to the needs, complaints, and fears of my clients. Lately, many clients have had their mortgage loan servicing transferred from Bank of America to other servicers, including Specialized Loan Servicing and NationStar, and they are worried that these transfers may prevent them from obtaining mortgage relief pursuant to the National Mortgage Settlement (sometimes referred to as the "DOJ Settlement"). The Consumer Financial Protection Bureau, a newer Federal agency, appears to be concerned as well.

Mortgage Loan Modification

The National Mortgage Settlement ("NMS") was between the Federal Government, 49 of the 50 States (Oklahoma did not participate), and Bank of America, Citibank, GMAC/Ally Financial, JP Morgan Chase, and Wells Fargo Bank. The NMS was supposed to establish new mortgage loan servicing and foreclosure standards for many loans, provide greater protection for the rights of borrowers, and provide compensation and assistance to homeowners. Compliance by the 5 largest mortgage loan servicing banks has been spotty.

The National Mortgage Settlement is primarily governed by the "Consent Judgments" on file with the United States District Court for  Washington, D.C. These judgments (300 pages or so each) represent the terms of the settlement agreement between the governments and the above named banks. According to the NC Department of Justice, the settlement was intended to provide "as much as 338 million in assistance to North Carolina consumers by reducing principals and refinancing mortgages at lower interests." The Settlement came about due to evidence of widespread fraudulent activities by these mortgage loan servicers, including wrongful foreclosures and the disregard of proper mortgage loan modification processes.

Foreclosure Hearing


The terms are not always clear, and the implementation of the goals of the Settlement are even more challenging. One major problem which has arisen is how and whether the terms of the NMS apply to loans which were owned and/or being serviced by one of the defendants as of the time of the settlement, but have now been transferred to a new owner or servicer. In fact, there have been so many loans transferred lately - many more than usual - that the Consumer Financial Protection Bureau has formally announced that it will be closely monitoring the situation. The CFPB has identified three (3) main issues it will focus on:

  1. How a transferor servicer has prepared for the transfer of servicing rights and/or responsibilities.

  2. How a transferee servicer handles the files transferred to it.

  3. For loans with loss mitigation in process (e.g., pending loss mitigation applications, trial modifications, forbearance plans, or short sale/deed-in-lieu agreements), what policies the transferor and transferee implemented, including what procedures they adopted to ensure proper consideration and treatment of the mortgage relief applications.

In my firm's communications with the formally appointed Monitor of the National Mortgage Settlement, former North Carolina Commissioner of Banks Joseph A. Smith, Jr., he has indicated that outward transfers of loans by NMS defendants is a major concern of his and of the Office of Mortgage Settlement Oversight. Mr. Smith acknowledges that there are many questions, and not all of them have easy or clear answers. Unfortunately, his Office does not have the power to intervene in specific cases, or to directly force Bank of America, Chase, CitiBank, GMAC/Ally Financial, or Wells Fargo to comply with the Settlement terms.

We remain hopeful, but not necessarily optimistic that the NMS will prove to be the game changer it was meant to be. It has clearly helped many borrowers, but will it help enough?






Monday, February 11, 2013

Why the Independent Foreclosure Review (RIP) Became a Sham

The Independent Foreclosure Review (RIP) Became a Sham

 In a fairly shocking development, the Independent Foreclosure Review has now been abandoned and is being "replaced" by other measures related to another mortgage and foreclosure abuse settlement. In addition to obvious flaws in the process, consultants involved in the Independent Foreclosure Review may have made as much as ONE BILLION DOLLARS, far more than was paid to wronged borrowers.

North Carolina's own Brad Miller, a United States Congressman of ten years (who just left office) and a recognized consumer advocate stated "Most of the consultants' hands are not clean. They were involved in the foreclosures in the first place, as were the law firms [working on the reviews].” He also pointed out that  the Independent Foreclosure Review program has been scrapped just before a Government Accountability Office (GAO) review was supposed to come out, a review that everyone expected to condemn the process as flawed. Before leaving office, Mr. Miller stated " [Regulators] were almost certainly about to get a very critical review from the GAO. The reviews seems to have been somewhat haphazard, and they never quite got them organized.”

Even American Banker is skeptical of what happened hereIn fact, a writer for Forbes who has been tracking this mess states "In a brilliant strategy orchestrated jointly by the banks and their consultants, the project was stopped because the OCC/Fed became uncomfortable with the billions of dollars in fees paid to the consultants by the banks with no results in sight. These industry-expert consultants used a manual process rather than utilizing automated tools to gather borrower data and review it for harm." You see, a manual process could be spun as somehow more "detail-oriented" (let's roll our sleeves up and get to work!) while also causing the process to take much, much longer (more $ in fees!) without reaching as many conclusions (banks, you don't have to pay unless we reach negative conclusions!).

Other elected officials also seem to think that something is rotten in the state of Denmark (no offense, Danes, just stealing a quote from Shakespeare's Hamlet here). Carolyn Maloney, a New York Democrat who is a member of the House Financial Services Committee, has called for an investigation by federal compliance officials, as has Representative Maxine Waters, who is only the highest ranking member of the House Financial Services Committee

In fairness, those hired to perform the Independent Foreclosure Review would have to have had some knowledge and skill relevant to the relevant issues. However, having the same companies who perform day to day consulting for these banks - their largest customers - perform the review was a mistake. It's certainly much more difficult to make findings against Bank of America, Chase, CitiBank, GMAC/Ally Financial, Wells Fargo, etc. if these are the same entities who are paying your bills and making your leaders multi-millionaires.

I wonder whether the wrongfully foreclosed upon borrowers will ever get as much money as the consultants got.


Thursday, February 7, 2013


Foreclosure Hearing - BOA Case, Columbus County, Feb. 5 2013

The following is a summary of a foreclosure hearing that McGrath & Spielberger assisted a borrower with, and is provided for informational purposes only.

Foreclosure Hearing OutcomeClient’s Motion to Continue Foreclosure Hearing granted; foreclosure sale date canceled.

Borrower’s AttorneyJason A. McGrath of McGrath and Spielberger.

Actions Taken by McGrath & Spielberger on Behalf of Borrower (Specifically in Relation to the Foreclosure Hearing): Settlement negotiations, Motion to Continue Foreclosure Hearing filed, Mr. McGrath attended hearing with client.

Mortgage Loan Servicer / Foreclosing Bank: Bank of America

Distressed Property Address (City): Whiteville, NC

Type of Distressed Property: Primary residence / owner occupied

Date of Foreclosure Hearing: February 5, 2013

Location of Foreclosure Hearing: Columbus County, NC

Bank’s Trustee: Trustee Services of Carolina, LLC This is a company created by the Brock and Scott law firm to serve as bank’s substitute trustee in foreclosure cases; this company then hires Brock and Scott to serve as the lawyers for the substitute trustee; this allows them to potentially capture trustee fees AND attorney fees in the same case. Brock and Scott even has a “holdings” corporation set up as a separate business entity.

Law Firm for Bank’s Trustee: Brock and Scott, PLLC







Monday, February 4, 2013

FHA Loan Mortgage Relief - Many More Borrowers Now Eligible

Changes in FHA Mortgage Relief / Loss Mitigation Policies Should Allow Many More Borrowers to Save Their Homes

FHA Update

My law firm represents borrowers who are in need of assistance with their mortgage loans, and we do so in multiple states (FL, GA, NC, OH, SC, TN). Some of those homeowners have Federal Housing Administration (FHA) loans. We are very pleased to report that the FHA has now made significant changes to its mortgage loan relief / loss mitigation policies which should allow many more borrowers to save their homes.  In fact, McGrath & Spielberger has already made mortgage loan lenders/servicers aware of this change, as these new policies may very well make several of the Firm's mortgage relief clients eligible for mortgage loan modifications under the Home Affordable Modification Program.

The changes are reflected in the United States Department of Housing and Urban Development (HUD) - of which FHA is part - Mortgagee Letter 2012 - 22. It states that "mortgagees [lenders] must begin to assess mortgagors in default under FHA's loss mitigation priority order and policies referenced herein" within 90 days of the letter, which is dated November 16, 2012. Here it is: Mortgagee Letter 2012-22 (Revisions to FHA MR Options).

Here are the key changes, with comments from attorney Jason McGrath in italics.

  1. Eliminating the FHA-HAMP eligibility requirement that the FHA-insured mortgage be no more than 12 full payments past due.  Previously, a borrower in Raleigh, NC (for example)  with an FHA insured mortgage was not eligible for mortgage loan modifications under the Home Affordable Modification Program (which is part of the Making Home Affordable program) if (s)he was more than 12 months behind on the mortgage. In other words, those most desperate for help were not eligible.

  2. Eliminating the FHA-HAMP maximum Back End Debt-to-Income Ratio requirement of 55 percent. In the past, a distressed homeowner who lived in West Palm Beach, FL would not even be considered for a mortgage loan modification if his/her monthly housing cost made up more than 55% of the monthly gross income. (Monthly housing cost includes principal, interest, property taxes, home insurance and HOA fees, if any.) For example, that south Florida borrower who has a monthly gross income of $4,000.00 a month and a monthly housing cost of $2,250.00 would not have been eligible for mortgage relief allowing the home to be saved, but may be now.

  3. Permitting those mortgagors who were initially unsuccessful in completing Trial Payment Plans to re-apply for standard loan modifications or FHA-HAMP if their
    financial circumstances have changed since their initial application for assistance. We have resubmitted loss mitigation applications on behalf of many of our clients, including those in Charlotte, NC, often due to mistakes by the banks, who frequently wrongfully deny borrowers' request for mortgage relief. Sometimes these applications are submitted due to a change in financial circumstances, and our success rate upon re-application is quite high.

As always, one of the challenges is educating the banks and loan services as to the new rules, as these mammoth entities don't often do a good job of that themselves. For example, just this week in a case in Union County, North Carolina, we had to send a Bank of America Single Point of Contact representative these new FHA / HAMP rules, as she was not aware of them and was insisting our client does not qualify for mortgage relief because our client is more than 12 months behind on the loan.

The bottom line, whether you're in Atlanta, Nashville, Columbus (OH), Charleston (SC), or anywhere else, if you have an FHA mortgage and you're in trouble with it, you need to make sure your mortgage loan servicer and lender are applying these new rules on your behalf and as part of your loss mitigation efforts.

West Palm Beach fights for Florida State University's Digital Media Campus and Program

West Palm Beach fights for Florida State University's Digital Media Campus and Program



West Palm Beach is putting on a full-court press to ensure anyone deciding the fate of the Florida State University Digital Media program understands that taking the program out of West Palm Beach will sacrifice jobs, economic opportunity, and put an end to the creation of a new industry cluster in the state of Florida.

Following media reports of a meeting held earlier in the week, city officials confirmed that Tuesday a delegation from the city traveled to Naples, Florida to meet with Ed Morton. Morton is one of three Florida Board of Governors members examining the FSU program.

The delegation included West Palm Beach Mayor Jeri Muoio, Executive Director of the West Palm Beach Community Redevelopment Agency Kim Briesemeister, and West Palm Beach City Attorney Claudia McKenna.

“We’ve invested in this program.  We know the impact it will have on Florida’s economy. We remain prepared to continue to invest in it. With Digital Domain out of the way and our land back in our hands, we have been moving ahead.  There are several companies that have clearly said they want to be a part of the industry cluster we are building,” said West Palm Beach Mayor Jeri Muoio.

“This program means jobs and economic opportunity for Florida.  The opportunity to create an entirely new industry cluster in the state should be encouraged, and we want to make sure anyone weighing the fate of the FSU program understands what is at stake,” added Muoio.

Mayor Muoio and other city leaders have been contacting several other members of the Florida Board of Governors, as well as Governor Rick Scott.  The city is planning on sending a delegation to Tallahassee next week to meet with several individuals. Members of the Board of Governors are also scheduled to meet next Friday in Orlando to discuss the FSU program.

“We will go to all four corners of the state if we have to,” said Muoio. “I intend to fight to keep the jobs here in Florida. I intend to fight to keep the program.”


McGrath & Spielberger founding attorney Jason A. McGrath is a graduate of Florida State University, with a Minor in Spanish, a BS in International Affairs, a BS in Political Science, and Doctorate of Jurisprudence. He was an Assistant State Attorney in West Palm Beach, Florida for 5 years, serving the citizens of Palm Beach County, and continues to practice law in Florida.




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Friday, February 1, 2013

How BOA Tainted the Allegedly Independent Foreclosure Review

How BOA Tainted the Allegedly Independent Foreclosure Review 


The "Independent Foreclosure Review" (may it now rest in peace) was established as a result of a settlement of federal lawsuits against numerous mortgage loan lenders and servicers. The intent was to provide compensation to borrowers who were improperly foreclosed upon. Borrowers were supposed to be able to file for relief, have their case reviewed by independent third parties, and perhaps end up with a monetary award. Obviously, the "independent" nature of the process meant that the big banks were not supposed to be able to influence the results - in other words, the inmates were not supposed to have the keys to the jail. Well, it turns out that, Bank of America, at least, was directly influencing the outcomes of the "independent" foreclosure reviews. I realize that this will be *shocking* to all of you whom have enjoyed your mortgage relief and foreclosure experiences with BOA.

Some of the review work was performed by consulting companies which are regularly used by the big banks, which calls the objectivity of the reviews into question from the start. However, the more incredible fact is that the "independent" reviewers were receiving files to review - along with the conclusions to various investigatory conclusions already reached by Bank of America itself. In other words, the "independent foreclosure reviewer" would open a a review file (on the computer) and the default answers to the investigatory questions would already be there, as entered by BOA. 

Amazingly, one of the third parties conducting the reviews eventually admitted this (as did BOA) but also had the unmitigated gall to come out and state that its decisions were reached "without input or influence from Bank of America." Really? Really, Promontory Financial Group? I mean, we're not all idiots. The "answers" were on the screen  - put there by BOA - and yet BOA had no "input" or "influence"?!  

It appears that the reviewer was able to override the conclusions that BOA's own folks had reached (and entered into the file). However, given human nature, it is indisputable that having the "answers" already there influenced the findings and decisions in at least some cases. This ridiculous scenario was changed in late 2012, when both BOA and Promontory admitted that a "technical change" had been made in the process so that the *independent* reviewers allegedly no longer saw the conclusions reached by Bank of America before they reached their own conclusions.


McGrath & Spielberger, PLLC provides assistance to those involved in mortgage disputes, including borrowers in need of mortgage relief services such as mortgage loan modification, foreclosure negotiation, and deed-in-lieu or other negotiated settlement resolutions.