Countrywide is one of the largest, if not the largest, mortgage companies in the country. They started backing out of sub-prime loans before a lot of companies, and they have plenty of prime loans in their inventory. Countrywide’s stock fell 10.5% earlier this week, and its Chairman says not to expect a reocovery in the housing market until at least 2009. (Most of these facts come from articles in the Wall Street Journal or New York Times. They aren’t linked to here, because I have seen several over the last few days.) Oh, and it isn’t just their subprime loans that are showing increasing delinquency rates either. The delinquency rates for their prime loans, although still much lower than for subprime loan, has more than doubled.

So, what does this have to do with lawyers? Simple. Lawyers who represent consumers need to be up to speed on foreclosure defenses, mandatory loss mitigation procedures, foreclosure accounting techniques — all the stuff you didn’t learn in law school. It is no longer true that there are no defenses to a foreclosure action.

I will be in St. Louis September 7 – 9 at the National Association of Consumer Advocates’ Mortgage Lending Litigation Conference: Representing Homeowners Facing Foreclosure with the Support of the AARP Foundation. Later this Fall, the National Association of Consumer Bankruptcy Attorneys is sponsoring a Members-Only Workshop with one day focused exclusively on mortgage issues.

If you reprsent consumers and are concerned about rising foreclosures, now might be the time to look at doing a little out of state CLE. It really is worth the money.

Elaine

If you live in Jacksonville, Florida and qualify for Legal Aid — you’re in luck! You just might have access to one of the best foreclosure defense attorneys in the United States — April Charney.

Forbes.com has an article on foreclosure defense that features April prominently. The dateline on it is June 18, 07; but I don’t know if it will be in a paper edition or not. The gist of the article is that April has successfully defended foreclosure actions where the plaintiff can’t prove that it owns the note and mortgage.

Yep, these things have been sold and repackaged so many times that in some areas the papertrail can no longer be followed. Consider if you will, the effect of this on our real property laws which haven’t changed much since the 14th Century.

Of course, sometimes it is more complicated than that. Sometimes, you can trace the ownership history — except it can’t happen. In one case described in the article the note and mortgage in question were bought by a securitized trust after the note was in default — and that is in violation of the trust terms.

Sometimes, a review of the title history reveals that the note and mortgage weren’t actually acquired by the Plaintiff until after it filed the foreclosure petition. Could that lawyer not spell Rule 11?

Of course, don’t expect to find this kind of title history in anyplace as archaic as the County Clerk’s office. Frequently, the assignments aren’t actually recorded. If all these assignments were recorded, they would have to pay filing fees on all of them. So, against whom are these assignments effective — if they aren’t perfected?

I’ll be going out of state for CLE on mortgage issues in the fall. It ought’a be fun.

Elaine

It shouldn’t come as any big surprise that when someone gets into trouble with a sub-prime loan a successful restructuring is difficult at best. USAToday.com thinks this issue warrants a front-page article. The article doesn’t read as if it were written by someone with real experience in the trenches with sub-prime borrowers. The focus seems to be that these aren’t FHA loans, and FHA loss mitigation regulations are not applicable. To my mind, article this makes certain assumptions that I don’t think can be made.

First, this assumes that FHA loss mitigation procedures are being applied in every FHA loan delinquency; and it assumes that they are being applied evenly and correctly. I don’t think that is a fair assumption.
To me, the real point of this article is my post from yesterday. Read the note. Read the mortgage. Everytime. Then, send a QWR to the servicer requesting a payment history, a copy of the servicing and pooling agreement and copies of any applicable loss mitigation procedures. Everytime.

Do I do this? Not often. Generally when clients come to me they are beyond this point, but I am starting to look more carefully at loan docs when faced with motions for relief. In a response I filed on Friday I asked for my fees, and I asked for an order finding that the servicer is not entitled to an attorney’s fee to be assessed against the account. Why? Because I had read the note and mortgage and neither the servicer nor his attorney had.

Read the note. Read the mortgage. Investigate the loss mitigation procedures included in the pooling and servicing agreement. Then, ask for fees.

Elaine

About two weeks ago I blogged about the financial problems of New Century Mortgage, which incidentally just filed for Bankruptcy. Most of the news around New Century and the whole sub-prime loan mess center on the sub-prime loan mess, as if this is an isolated financial area — except that nothing is an isolated financial area anymore.

In December Super Future Equities, Inc. filed its Third Amended Complaint in Super Future Equities, Inc. v. Wells Fargo National Bank, et al. with the U.S. District Court fot the Northern District of Texas, Dallas Division. This Complaint is 95 pages long. The Defendants are Wells Fargo Bank, as Trustee of certain mortgage backed certificates and a number of related corporations and their principals. Those corporations provide mortgage servicing and default servicing for commercial mortgages.

Like all Complaints this one is just a set of unproven allegations. However, this particular 95-page Complaint includes quotes from Pooling and Servicing Agreements, flow charts, and other detailed information that makes it look like whoever wrote it knew what he was talking about.  It appears from info available on the web that the Plaintiffs are a pair of young adults who may — or may not– have an ax to grind.

I don’t know if any of the allegations in this Complaint are true.  Although it certainly appears to describe the extent to which it may be possible for mortgage servicers, default servicers, and in this case the trustee, to serve their own best interests and not the interests of the actual mortage holders or the borrowers. In fact, the gist of this Complaint is to allege that the Defendants have conspired to effectively steal millions of dollars from the investors in the mortgage pool. The complaint makes it clear that this is actually stealing from the mortgage borrowers as well as from the investors, but the borrowers aren’t parties to the litigation.

This strikes home for me, because I was trying to explain to a client last week why a mortgage servicer would want to essentially manufacture an event of default — which is happening with her consumer mortgage controlled by completely different parties than those in this lawsuit. However, intentionally manufacturing events of default is one of the allegations raised against the servicers in the Super Future Equities case, only it is being raised by the underlying investor, not the borrower.

The really scary part of this Complaint is that some part of it might be true.  If that turns out to be the case, the events involving New Century and its recent Bankruptcy filing may become as much a symbol of needed change as the failure of Penn Square Bank. The real question will then be what is the extent of the needed change, how great will the repurcussions be and who will wind up holding the bag. I am afraid that the answer to the first part of that question is going to require analysis of what the financial markets now consider to constitute basic business ethics.  (That does not mean to imply that New Century had anything to do with the loans involved inthe Super Future Equities lawsuit. )

I have linked to the Complaint if anyone wants to read it. I am only about half way through it myself, but I will be back with more on this lawsuit later. Mortgage backed securities and their servicing is a many hundreds of $billions a year business. It warrants more attention than it has been getting, especially for those of us who deal with credit issues, mortgages and foreclosures — consumer or commercial.

Elaine