Mass Sues The BIG Banks

[dales]

http://www.npr.org/2011/12/01/143006695 ... t=1&f=1001

Massachusetts Sues Big Banks Over Foreclosures

by The Associated Press

December 1, 2011


Massachusetts sued five major banks Thursday over deceptive foreclosure practices such as the "robo-signing" of documents, potentially undermining negotiations between lenders and state prosecutors across the nation over the same issue.

The lawsuit named Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Citigroup Inc., and GMAC. It was filed in Massachusetts by Attorney General Martha Coakley.

The complaint claims the banks violated Massachusetts law with "unlawful and deceptive" conduct in the foreclosure process, including unlawful foreclosures, false documentation, robo-signing, and deceptive practices related to loan modifications. In the foreclosure industry, robo-signing is the practice of a bank employee signing thousands of documents and affidavits without verifying the information contained in the document or affidavit.

The lawsuit comes as talks have been dragging on for more than a year between major banks and the attorneys general from all 50 states over fraudulent foreclosure practices that drove millions of Americans from their homes following the bursting of the housing bubble.

In October of 2010, major banks temporarily suspended foreclosures following revelations of widespread fraudulent foreclosure practices by banks. The talks have been designed to institute new guidelines for mortgage lending nationwide. It was anticipated to be the biggest overhaul of a single industry since the 1998 multistate tobacco settlement.

However, over the past year, several obstacles have arisen. Attorneys general of different states have disagreed over what terms to offer the banks. In September, California announced it would not agree to a settlement over foreclosure abuses that state and federal officials have been working on for more than a year.

Coakley, along with New York Attorney General Eric Schneiderman and Delaware's Beau Biden, have argued that banks should not be protected from future civil liability. Other states, including Kentucky, Minnesota and Nevada, have raised concerns about the extent of legal civil immunity the banks would receive as part of a settlement.

Both sides have also argued over the amount of money that should be placed in a reserve account for property owners who were improperly foreclosed upon. Many of the larger points of the deal, including a $25 billion cost for the banks, have been worked out, according to people briefed on the internal discussions but who are not authorized to speak publicly about them.

The settlement is expected to be announced sometime this month.

The lead negotiator on behalf of state prosecutors, Iowa Attorney General Tom Miller, said in a statement that he hopes Massachusetts would join the broader settlement that's still being worked on.

"We're optimistic that we'll settle on terms that will be in the interests of Massachusetts," Miller said.

Now if California's AG will follow suit.

[Sue U]

It beats the ususal response to banks' bad behavior, which is, apparently: "You've been naughty, naughty banks. Here's 700 billion dollars."

[BoSoxGal]

[dgs49]

Quick review: "Fraud" is intentional deception in order to obtain a financial benefit. I sell a remanufactured product as new, at a price that is suitable for a new product, but twice what a remanufactured product should cost. That is fraud.

Only an infinitesimal portion of the mortgage loans being challenged were induced by fraudulent representations. And in those cases, it is merely alleged that the borrowers were told things that contradicted the written contracts that they signed (which COULD constitute fraud - TBD by a jury). There is NO ALLEGATION WHATSOEVER that the banks acted in a way that was contrary to the documents.

The "robo-signing" allegation is total and utter nonsense. It has nothing to do with the documents that were signed, or the competence of the borrowers, or the fact that they FAILED TO REPAY THE LOANS as they were contractually obliged to do.

As a general proposition, all of the borrowers voluntarily signed the notes, voluntarily TOOK THE MONEY, and voluntarily assumed all of the customary risks of signing a mortgage note: That they might lose their jobs, that interest rates might increase, that the property value might not meet their very optimistic expectations, etc. And when the risks that they voluntarily and knowlingly assumed didn't pan out, they want to be relieved of the obligation to repay the loans.

They assumed that Real Estate values would continue to rise by 10-15%/year forever. Their assumptions were unrealistic, unsubstantiated, and ultimately wrong.

Martha Coakley. What a fucking joke.

[Long Run]

It beats the ususal response to banks' bad behavior, which is, apparently: "You've been naughty, naughty banks. Here's 700 billion dollars."

Well, it is actually a few trillion, based on recently released Fed documents -- borrow from the Fed (our left pocket) at zero%, buy Treasuries and receive 2-3% (dollars from our right pocket), and keep the difference until you're balance sheet is healthy. Then pay us back the trillions and we can all pat ourselves on the back about how we have straightened things out.

That said, Dave is correct: this is overwhelmingly about banks not crossing their "t"s or dotting their "i"s, which they should do. Their failure to do so, means they are delayed in accomplishing what they are entitled to do -- foreclose the home of someone who has not paid the mortgage. (There are a few examples of banks actually wrongfully foreclosing by having the foreclosure people not realize that the borrower had another payment plan going, and they've paid dearly for those mistakes (as they should).) Of course, it is hard not to root against the banks since they have done such a lousy job of being bankers and there were no apparent consequences for the executives who led them into the abyss from which we rescued them.

[Andrew D]

"Fraud" is

irrelevant.

Massachusetts is suing over alleged violations of its statutes prohibiting any "unfair or deceptive act or practice". As the the highest court of Massachusetts has explained, under those statutes "the definition of an actionable ‘unfair or deceptive act or practice’ goes far beyond the scope of the common law action for fraud and deceit. To cite only a few distinctions, in the statutory action proof of actual reliance by the plaintiff on a representation is not required, and it is not necessary to establish that the defendant knew that the representation was false."

(Slaney v. Westwood Auto, Inc. (Mass. 1975) 366 Mass. 688, 703-704, 322 N.E.2d 768, 779 (emphasis added; citations omitted).)

As the highest court of Massachusetts has repeatedly held:

A practice is unfair if it is “within ... the penumbra of some common-law, statutory, or other established concept of unfairness; ... is immoral, unethical, oppressive, or unscrupulous; [and] ... causes substantial injury to [other businessmen].” PMP Assocs., Inc. v. Globe Newspaper Co., 366 Mass. 593, 596, 321 N.E.2d 915 (1975).

(Linkage Corp. v. Trustees of Boston University (Mass. 1997) 425 Mass. 1, 27, 679 N.E.2d 191, 209 (brackets and ellipses in original).)

Pleasant as it may be to place all the blame on the people who got duped and none of the blame on the people doing the duping, Massachusetts does not have to prove fraud to prevail in its suit. And rightly so.

[dgs49]

Another attack of the penumbras (penumbrae?). Is this Sharia law?

Please explain why it immoral, unethical, oppressive, or unscrupulous when, after having loaned someone hundreds of thousands of dollars, you to expect it to be repaid, as agreed.

I do not "blame" anyone. I merely point out that people ought to pay their legal debts. Almost like being responsible for one's own actions, which, I know, is a concept that Libs find hard to swallow or, at times, to even understand.

And the charge in this particular case is not that the borrowers were duped, but merely that the lenders did not scrupulously adhere to principles of good administrative policy when completing the associated forms. That is to say, the state, on behalf of the borrowers, wants to avoid the substantive obligations on the part of one party because of a clerical error on the part of the other party.

Now THAT would be unethical, oppressive, and unscrupulous to the LENDERS and the LENDERS' stakeholders. But hold the pity party; they only want what they are entitled to.

[quaddriver]

Pleasant as it may be to place all the blame on the people who got duped and none of the blame on the people doing the duping, Massachusetts does not have to prove fraud to prevail in its suit. And rightly so.

Did you just say that MA does not have to prove a fraud was committed, in order to get a judgment in its favor for fraud?

Good thing that does extend to murder eh?

[Sue U]

***

In the complaint, the Attorney General alleges these five entities engaged in unfair and deceptive trade practices in violation of Massachusetts’ law by:

Pervasive use of fraudulent documentation in the foreclosure process, including so-called “robo-signing”;
Foreclosing without holding the actual mortgage (“Ibanez” violations);
Corrupting Massachusetts’ land recording system through the use of MERS;
Failing to uphold loan modification promises to Massachusetts homeowners.

USE OF FALSE DOCUMENTS TO EXPEDITE FORECLOSURES “ROBO-SIGNING”:

According to the complaint, the banks used false documentation in the foreclosure process, including so-called “robo-signing”, whereby bank personnel signed affidavits that were untrue, or not based on the signor’s actual knowledge. An entity wishing to foreclose on a property must demonstrate it has filed an affidavit in compliance with Massachusetts law. By October 2010, the banks’ flagrant disregard of affidavit and notary process requirements became widely known. Filings with various Registers of Deeds provided to the Attorney General’s Office revealed the pervasive use of mortgage service employees to sign hundreds of affidavits and sworn statements without personal knowledge of the information contained in those affidavits. Evidence also suggests these practices were not confined to the foreclosure process, but also used in the assignment, transfer and modification of mortgages secured by property in Massachusetts.

FORECLOSING WITHOUT LEGAL AUTHORITY “IBANEZ VIOLATIONS”:
Second, these five entities participated in unlawful foreclosures when they commenced foreclosures on mortgages where they were not the holders of those mortgages. The Supreme Judicial Court (SJC), in Commonwealth v Ibanez, recently upheld Massachusetts law and stated that “only the present holder of a mortgage is authorized to foreclose on the mortgaged property.” The complaint alleges that these entities ignored this fundamental legal mandate and proceeded to foreclosure even though they did not hold the mortgage, and thus had no legal authority to conduct the foreclosure. The banks’ failure to obtain a valid assignment of the mortgage prior to foreclosure has adversely impacted titles to hundreds, if not thousands, of properties in the Commonwealth. The complaint alleges that the banks falsely claimed to be the holder of a mortgage in several foreclosure documents even though they failed to obtain a valid assignment of the mortgage.

UNDERMINING PUBLIC RECORDS “MERS”:

Third, the complaint alleges that these banks have undermined our public land record system through the use of MERS, a private electronic registry system. According to the complaint, the creation and use of MERS was adopted by these defendants primarily to avoid land registration and recording requirements, including payment of recording and registration fees, and to facilitate sales of mortgage loans. The use of MERS has resulted in a lack of transparency as to the entities that have the legal authority to enforce mortgages, and unfairly conceals from borrowers the true identity of the holder of the debt. Since 1997, more than 63 million home loans have been registered on the MERS System, accounting for more than 60 percent of all newly-originated mortgage loans. The complaint also alleges that through the use of the MERS system, the banks unlawfully failed to register assignments of mortgages and transfers of the beneficial interests in mortgages.

MISREPRESENTING LOAN MODIFICATION PROGRAMS:

Finally, the complaint alleges the banks deceived and misrepresented to borrowers the process, requirements, and availability of loan modifications. The banks publically claimed to be engaged in widespread loan modifications aimed at preserving home ownership and avoiding unnecessary foreclosures. Through the National Homeownership Retention Program, which commenced on November 6, 2008, these banks represented that they would work with borrowers to help them avoid unnecessary foreclosures by reducing monthly mortgage payments to affordable and sustainable levels. The complaint alleges these banks misled borrowers about their eligibility for this program and the amount of relief available, failed to achieve a significant level of modifications, and often strung along borrowers for months in trial modifications that were ultimately rejected.

The AG’s lawsuit seeks civil penalties, restitution for harm to borrowers and compensation for registration fees that were avoided. The lawsuit also seeks to hold the banks accountable through permanent injunctive relief to provide a solution for prior unlawful foreclosures and to require that the banks, going forward, register assignments and other documents in accordance with Massachusetts law.

***


[complete complaint available at link below]

http://www.zerohedge.com/contributed/co ... ac-wells-f

[dgs49]

I see no fraud here. The borrowers were not induced to sign the original notes by false statements by the lenders. The Banks appear to have taken shortcuts to facilitate the foreclosures, and that may be wrongful, but it does not vitiate the breach of contract by the borrowers.

As for the misrepresentation of loan modification programs (if it actually occurred) that was after the fact, and could not have influenced any borrower to enter into the mortgage loan agreement.

An example of real fraud would be: Lender induces borrower to sign ARM by telling him verbally that the contract really doesn't mean what it says - "the interest rate will never go above X percent." I haven't even see an allegation of FRAUD, just politicians trying to gain favor with the voters by bringing a bullshit lawsuit that might - with a willing court - result in some borrowers receiving a figurative "get out of jail" card for free.

Not surprising at all for MA and this group of elected officials.

[Sue U]

I see no fraud here. The borrowers were not induced to sign the original notes by false statements by the lenders. The Banks appear to have taken shortcuts to facilitate the foreclosures, and that may be wrongful, but it does not vitiate the breach of contract by the borrowers..

Your "point" might be better made if you actually knew what you were talking about -- for example, what the Massachusetts lawsuit is actually about and what relief is being sought. Despite your blathering, it has absolutely nothing to do with "vitiat[ing] the breach of contract by the borrowers," nor about depriving banks of any property or loan repayments to which they are entitled. This case has absolutely nothing to do with any allegations of fraudently inducing borrowers to take out mortgages. If you had taken roughly five minutes to educate yourself, you would have learned that the banks are alleged to have violated state laws by (1) foreclosing on and selling property on which they did not actually hold the mortgage, (2) falsely representing themselves as the mortgage holders, (3) failing to identify the actual mortgage holders, (4) falsifying documents to obtain an interest in the properties, and (5) failing to register assignments of mortgages, as required by statute.

In filing this lawsuit, the Commonwealth is not in any way acting on behalf of mortgagors to somehow nullify their debts. This is a civl enforcement action. (It says so right in the first paragraph of the Complaint.) The relief it is seeking is civil penalties for violations, together with fees and costs, and injunctive relief to require the banks to comply with the law and to cure the defects in property titles caused by their unlawful procedures.

But hey, since when have the facts ever gotten in the way of your bitching?

[Scooter]

In what universe would

(1) foreclosing on and selling property on which they did not actually hold the mortgage, (2) falsely representing themselves as the mortgage holders, (3) failing to identify the actual mortgage holders, (4) falsifying documents to obtain an interest in the properties

not constitute fraud?

[dgs49]

Paperwork.

Fictions.

Versus.

Reality.

Borrowers did not pay (i.e., defaulted on the mortgage loans). No question about that.

Lenders/mortgage holders were entitled to foreclose and sell the properties. No question about that.

In the process of transferring the "paper" (i.e., loans) from one financial institution to another, the banks allowed their actions to get out of sequence. They didn't follow the letter of the law with respect to signatures and authentication. Bad banks!

The Mortgagor/borrowers were not defrauded. They defaulted on their loans, and the lender/mortgagee (whoever that was) was entitled to foreclose and re-sell the property. The paperwork snafu is now being used to try to justify cancelling the debts, overturning the foreclosures, and/or seeking damages for those WHO WERE NOT WRONGED IN ANY WAY.

Fictions versus reality. Take your pick.

[Scooter]

What would happen to you if you attempted to foreclose in order to recover on a mortgage you did not own. My guess would be jail...

[Sue U]

The paperwork snafu is now being used to try to justify cancelling the debts, overturning the foreclosures, and/or seeking damages for those WHO WERE NOT WRONGED IN ANY WAY.

Is it the reading or the comprehension you have trouble with? What part of this lawsuit involves any of the above? Oh, none?

Oh, and this was not a "paperwork snafu;" it was a pattern and practice of WILLFUL VIOLATION OF THE LAW -- the law that was specifically intended to ensure an orderly process and accurate records of who owned what and owed what to whom, so as to avoid mistakes and prevent fraud -- all of which was ignored and thrown into chaos by the banks' practices.

[Andrew D]

Pleasant as it may be to place all the blame on the people who got duped and none of the blame on the people doing the duping, Massachusetts does not have to prove fraud to prevail in its suit. And rightly so.

Did you just say that MA does not have to prove a fraud was committed, in order to get a judgment in its favor for fraud?

No. Not at all.

On the contrary, I wrote that Massachusetts does not have to prove that a fraud was committed in order to get a judgment in its favor for conduct which violated a Massachusetts statute (or set of statutes) which does not require proof of fraud. Even if there was no fraud, one can still be culpable for violating one or more of those statutes.

The whole "fraud" thing is a red herring. Claiming that one cannot be prosecuted for violating such a statute or statutes because one did not commit fraud is akin to claiming that one cannot be prosecuted for manslaughter because one did not commit murder.

This is why these statutes were enacted. (And versions of them have been enacted by most (all?) States.) The legislatures recognized the fact that one can engage in deception without committing fraud. And one can engage in an unfair practice without committing even deception, let alone fraud.

Those are the statutes on which the Massachusetts lawsuit is reportedly based. Those statutes do not require proof of fraud.

Will Massachusetts win? How should I know?

But if the defense is going to be "we did not commit fraud," then the defendants are screwed. I presume that they have better lawyers than that.

[Andrew D]

... those WHO WERE NOT WRONGED IN ANY WAY.

Well, according to you, they were not defrauded. Maybe you are right.

But were they the victims of conduct -- even non-fraudulent conduct -- that violated the statutes on which the Massachusetts lawsuit is based? You tell us.

After examining those statutes, you tell us. Stating the facts on which you base your claim, stating the relevant statutory provisions, and explaining how the facts on which you base your claim add up to non-liability under those statutory provisions, you tell us.

[dgs49]

Sure, Andrew. I'll take a day off work and research this point for you.

Or maybe not.

The basic facts and the essence of the law are pretty clear. The borrowers defaulted on their loans and the banks did a lousy of job of managing their paperwork. The result is a freaking mess. A legal tangle that will take years to resolve and provide tens of thousands of billable hours to an army of solicitors.

But from what has been reproduced here and in links, no homeowners have been defrauded, nor do they have any legal or moral right to have their loans modified or get their homes back. They signed agreements, took risks, the risks didn't pan out, and they lost. Into each life a little rain must fall.

Furthermore, there is no indication that these Banks were being particularly harsh or vindictive to the borrowers; they were merely trying to get the best possible results out of a mountain of unfortunate situations. They lost money on virtually all of these transactions, and were trying desperately to mitigate their losses. In the process they took unacceptable and illegal short cuts. Those short cuts didn't compromise the rights of the borrowers, except that they might have been able to remain in the houses they were not paying for, for a little longer.

No sympathy here.

[Andrew D]

So you have nothing to say about the defendants' conduct in relation to the assertedly applicable statutes.

That is, you have nothing to say about whether the Massachusetts suit has or does not have merit.

Okay.

[Guinevere]

As a Massachusetts lawyer I have brought claims under c. 93A and defended claims under c. 93A (these claims are routinely brought in commericial litigation matters, since they can result in the award of attorney's fees and/or multiple damages -- although in the end, not many courts actually award fees or multiples). I have not had the chance yet to read the AG's Complaint in any detail, but I will say that everything Andrew and Sue have posted so far is precisely right -- you can engage in unfair, deceptive, deceitful conduct (all in violation of the statute) without committing "fraud."

One interesting note, the case was filed in the Business Litigation Session of the Suffolk Superior Court, which means some of the best trial judges in the Commonwealth will be hearing this case, so the papers and decisions which come out of it are likely to be well-researched and well-written.