The Rule Of Law Matters

This is some of the best news I have seen in a long time (admittedly, there hasn't been much good news lately):

The highest court in Massachusetts ruled Friday that US Bancorp and Wells Fargo erred when they seized two troubled borrowers’ properties in 2007, putting the nation’s banks on notice that foreclosures cannot be based on improper or incomplete paperwork.

Concluding that neither institution had proved it had the right to evict the borrowers, the Supreme Judicial Court voided the foreclosures, returning ownership of the properties to the borrowers and opening the door to other foreclosure do-overs in the state.

Legal experts said that while this ruling did not set a precedent for other states, the outcome will be closely watched across the country because it is the first such ruling from a state’s highest court. Investors viewed the ruling as negative for banks; an index of financial company shares fell almost 1 percent on the day.

“The broad implication is you’ve got to dot your i’s and cross your t’s,” said Kathleen G. Cully, an expert in bankruptcy and lender regulatory law in New York. “You need a proper chain of title, and in both of these cases there was a gap in the chain.”

The case dates to July 2007, when Wells Fargo and US Bancorp began foreclosure proceedings against delinquent borrowers on two separate properties. Neither borrower fought the proceedings — the courts in Massachusetts are not obligated to oversee foreclosures — and both banks quickly seized the properties.

The banks’ problems began in the fall of 2008, when Wells Fargo and US Bancorp sought judgments from the Massachusetts Land Court that would have given them clear title to the properties. In 2009, the court rejected the banks’ arguments, ruling that the banks had not been assigned the mortgages before they foreclosed on the borrowers, as is required. Instead, the banks had acquired the mortgages after they had begun foreclosure proceedings.

The ruling on Friday upheld that decision.

Foreclosures are supposed to occur only when lenders can prove they own the note underlying the property.

While it is common now for borrowers to question whether banks moving to seize their properties have the right to do so, in 2007, most borrowers assumed that the institutions foreclosing on them were acting properly.

Since then, lenders’ foreclosure practices have come under intense scrutiny. Borrowers’ advocates have argued that lenders flouted private property rights in their rush to foreclose on troubled borrowers. As lenders and Wall Street firms bundled thousands of mortgage loans into securities, banks often failed to record each link in the chain of documents demonstrating ownership of a note and a property.

Attorneys general in all 50 states are investigating foreclosure improprieties, which include forged signatures on legal documents and other dubious practices meant to patch up holes in loan documentation.

A sad, sad day for the banksters and hedge fund criminals like Whitney Tilson - banks actually have to follow the rule of law.

Tilson, of course, is on record saying banks ought to be able to foreclose on anybody they want, paperwork be damned.

Tilson says following the letter of the law is just a technicality.

Thankfully the Massachusetts court found differently.

Hey, Whitney, The SEC Believes In Fraudclosure, How Come You Don't?

Yesterday I posted that hedge fund criminal and DFER Whitney Tilson shrugged off bank abuses in foreclosures, saying:

"I'd be very surprised if there were more than 1% of people who were actually kicked out of their homes who were actually current on their payments," he told us.

He explains Foreclosure-gate in one simple sentence.

"What has happened is, some percentage of foreclosures were probably legitimate foreclosures, but the letter of law was not followed because the system wasn't designed to handle the amount of volume of foreclosures that occurred, and banks, lawfirms, etc cut corners."

On Friday, Reuters reported that the SEC is expanding its investigation into the fraudclosure mess:

NEW YORK/WASHINGTON, Dec 17 (Reuters) - U.S. regulators have opened a new line of inquiry in their mortgage foreclosure probe and are asking big Wall Street banks about the beginning stages of mortgage securitization, two sources familiar with the probe said.

The Securities and Exchange Commission launched the new phase of its investigation by sending out a fresh round of subpoenas last week to big banks like Bank of America Corp (BAC.N), Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Goldman Sachs Group Inc (GS.N) and Wells Fargo & Co (WFC.N), the sources said.

The subpoenas focus on the earliest stage of the mortgage securitization process, said the sources, who requested anonymity because the probe is not public.

The sources said the SEC is asking for information about the role of so-called "master servicers" -- specialized firms that oversee the selection and maintenance of the large pool of home loans that go into every mortgage-backed bond.

In many cases, Wall Street banks that underwrite mortgage-backed securities either own their own master servicing firms or are closely aligned with one.

In the fall, the SEC began looking into the banks' foreclosure practices following allegations that mortgage servicers like Bank of America were using shoddy paperwork to evict delinquent borrowers from their homes.

The Justice Department, banking regulators and the attorneys general in all 50 U.S. states are also probing potential wrongdoing.

One of the sources said the SEC is seeking information about the role banks had in mortgage securitization. The regulator is also looking at the role trustees for the trusts that issued the mortgage-backed securities had in monitoring the performance of the underlying loans.

The SEC is looking at whether loans were properly transferred to the trusts that issued the securities, the source said.

The renewed look at the securitization process is an extension of the SEC's preliminary probe into the mortgage mess. The SEC's regional offices are all looking at some aspect of the foreclosure crisis.

In related news, both Nevada and Arizona are suing Bank of America for violating consumer protection laws in the loan modification process:

PHOENIX – Attorneys general in Arizona and Nevada filed civil lawsuits Friday against Bank of America Corp., alleging that the lender is misleading and deceiving homeowners who have tried to modify mortgages in two of the nation's most foreclosure-damaged states.

Bank of America violated Arizona's consumer fraud law by misleading consumers who tried to reduce their monthly payments to keep their homes, state Attorney General Terry Goddard said. The bank also violated the terms of a 2009 consent agreement requiring its Countrywide mortgage subsidiary to implement a loan modification program, the Arizona lawsuit alleges.

Hundreds of homeowners kept making their mortgage payments because Bank of America repeatedly assured them that their loans were being modified, Goddard said. Instead, many lost their homes anyway.

"Those people could have used that money for something else," Goddard told The Associated Press. "They were deceived into continuing to make mortgage payments when they had no hope of saving their homes."

Nevada Attorney General Catherine Cortez Masto told the AP that the Silver State's lawsuit was a last resort to try to get the bank to change its ways. It was filed after several discussions with bank managers led to assurances but little more.

"Clearly there is a disconnect between what Bank of America tells me at the management level and what's happening on the front line," Masto said.

Masto said separate lawsuits show the bank's problems with consumers are widespread.

"The only thing that I'm asking is that (Bank of America) give them a reasonable response in a timely manner," she said. "It is, in my perspective, a callous disregard for what we are telling them."

The SEC is expanding its investigation into fraudulent paperwork in the securitization process, Nevada and Arizona are suing BoA for massive fraud in the loan modification process, but Whitney Tilson thinks it's all good, the banks are just a little behind in the paperwork so they're speeding up the process by, you know, cutting some corners. But move along here, there's nothing to see, it's all fine and dandy, they're only breaking tiny little laws and most of these people are deadbeats anyway...

There are few people as despicable as hedge fund criminal Whitney Tilson.

Whitney Tilson Provides Excuses For Foreclosure-Gate

Leave it to hedge fund criminal Whitney Tilson to apologize for banks foreclosing on thousands of people illegally:

Hedge fund manager of T2 Partners, Whitney Tilson, would bring us back to reality.

"I'd be very surprised if there were more than 1% of people who were actually kicked out of their homes who were actually current on their payments," he told us.

He explains Foreclosure-gate in one simple sentence.

"What has happened is, some percentage of foreclosures were probably legitimate foreclosures, but the letter of law was not followed because the system wasn't designed to handle the amount of volume of foreclosures that occured, and banks, lawfirms, etc cut corners."

There you go, the scoop from Whitney Tilson - just too many deadbeats who fell behind on their payments and now the banks can't handle the volume.

But the banks are doing nothing wrong, you know - just trying to move the paperwork and foreclosures along.

Except that Tilson is dead wrong about this.

Barry Ritholtz at The Big Picture has been doing tons on the fraudclosure mess and you can see some links here.

The gist is, not following the letter of the law on foreclosures, foreclosing on people who paid cash for their homes, changing the locks on homes and locking people out BEFORE anything has been foreclosed upon is JUST NOT ACCEPTABLE in a land that is NOT a banana republic - property law matters.

Barry Ritholtz destroyed this jive back in October. Watch the last part of the video:




Hedge Fund criminal Whitney Tilson apparently only believes in following the letter of the law when it is in the favor of the banskters and hedge fund criminals like himself.

Property rights only matter when its the bank that owns the property.

I bet he wouldn't feel that way if he came home, found all his stuff strewn all over the lawn and the locks changed because BoA made a mistake on his mortgage.

Federal Reserve Wants To Make Foreclosures Easier For Banks

Gee, this sounds fabulous - for the banksters:

WASHINGTON — As Americans continue to lose their homes in record numbers, the Federal Reserve is considering making it much harder for homeowners to stop foreclosures and escape predatory home loans with onerous terms.

The Fed's proposal to amend a 42-year-old provision of the federal Truth in Lending Act has angered labor, civil rights and consumer advocacy groups along with a slew of foreclosure defense attorneys.

They're not only asking the Fed to withdraw the proposal, they also want any future changes to the law to be handled by the new Consumer Financial Protection Bureau, which begins its work next year.

In a letter to the Fed's Board of Governors, dozens of groups that oppose the measure, including the National Consumer Law Center, the NAACP and the Service Employees International Union, say the proposal is bad medicine at the wrong time.

...

Since 1968, the Truth in Lending Act has given homeowners the right to cancel, or rescind illegal loans for up to three years after the transaction was completed if the buyer wasn't provided with proper disclosures at the time of closing.

Attorneys at AARP have used the rescission clause for decades to protect older homeowners stuck in predatory loans with costly terms. The provision is also helping struggling homeowners to fight a wave of foreclosure cases in which faulty and sometimes-fraudulent disclosures were used.

...

Critics say the proposed change by the Fed would render the rescission clause useless. The Fed proposal would require homeowners who seek a loan rescission through the courts, to pay off the entire loan balance before the lender cancels the lien.

"This, of course, would be almost impossible for most consumers to do because they can't come up with the money until they get out of the loan. And they can't get out of the loan until the lien is released," said Barry Zigas, director of housing and credit policy at the Consumer Federation of America. "None of us are quite sure what purpose is being served by this proposal or what prompted it."

It's a bankster nation - we just slave in it.

Let me remind everybody that the Change We Can Believe In president was the guy who renominated Ben Bernanke to the Fed.

Heckuva job, Barack!