Too little - but not too late - we can still punish the banksters that put U.S. citizens out of their homes

A recent NY Post article caught my eye:

March 8, 2014

Ex-Jeffriestrader guilty of fraud

A federal jury found former Jefferies Group trader Jesse Litvak guilty of defrauding clients on mortgage bond trades, a victory for the government as it probes whether banks cheated their customers in the years after the financial crisis.

After reading about Litvak I wondered whether it is fact or urban myth that no top level bankers have gone to jail for perpetrating mortgage fraud. The Securities and Exchange Commission charged Angelo Mozilo of Countrywide with insider trading and securities fraud in 2009 for selling shares of his company while publicly proclaiming it was in fine shape. But those were civil charges, which Mozilo settled with $67.5 million in fines and a lifetime ban from serving as an officer of a public company. A criminal investigation was dropped.

In 2011, Michael J. McGrath Jr., former president of U.S. Mortgage Corp., was sentenced to 14 years in prison for orchestrating a conspiracy that defrauded credit unions and Fannie Mae of $136 million.

According to the DOJ press release - 2/24/11

Michael J. McGrath, Jr., the former president and controlling shareholder of closely-held U.S. Mortgage, previously pleaded guilty before U.S. District Judge Katharine S. Hayden to one count of mail and wire fraud conspiracy and one count of money laundering. Judge Hayden also imposed the sentence today in Newark federal court.

According to documents filed in this and related cases and statements made in court:

Beginning as early as 2002 to January 27, 2009, McGrath conspired to fraudulently sell Fannie Mae hundreds of loans belonging to various credit unions. Other members of the conspiracy included U.S. Mortgage’s chief financial officer and its servicing manager, Leroy Hayden. McGrath directed Leroy Hayden, who provided numerous reports to credit unions falsely stating that loans that had been sold were still in the credit unions’ portfolios, to falsify records to conceal the fraudulent sales.
McGrath admitted that he devised the scheme to prop up U.S. Mortgage, and that he used the proceeds to fund U.S. Mortgage’s operations, his personal investments, and investments he made on U.S. Mortgage’s behalf.

The pace of the fraudulent sales increased during 2008 and early 2009. On January 27, 2009, dozens of law enforcement agents executed a search warrant at U.S. Mortgage and CU National’s Pine Brook headquarters. In the following weeks, U.S. Mortgage and CU National commenced bankruptcy proceedings. Hundreds of U.S. Mortgage employees lost their jobs as a result.

In addition to the prison term, Judge Hayden sentenced McGrath to three years of supervised release. McGrath also consented to forfeiture of the proceeds of his crimes and $14 million of his assets that the government has seized or frozen. The Court postponed entry of a restitution order so that the victims’ losses could be properly allocated. The total loss amount, previously estimated at around $139 million, has been calculated as being somewhat less. The restitution order is expected to require McGrath to pay more than $136 million in restitution to his victims.

In 2011, Lee Bentley Farkas, the former chairman of a private mortgage lending company, Taylor, Bean & Whitaker (TBW), was convicted for his role in a more than $2.9 billion fraud scheme that contributed to the failures of Colonial Bank, one of the 25 largest banks in the United States in 2009, and TBW, one of the largest privately held mortgage lending companies in the United States in 2009.
After a 10-day trial, a federal jury in the Eastern District of Virginia found Farkas guilty of one count of conspiracy to commit bank, wire and securities fraud; six counts of bank fraud; four counts of wire fraud; and three counts of securities fraud.   At sentencing, one July 1, 2011, Farkas faced a maximum prison term of 30 years for the conspiracy charge and for each count of bank fraud, 20 years for each count of wire fraud related to TARP, 30 years for each count of wire fraud affecting a financial institution and 25 years for each securities fraud count.   Farkas was remanded into custody.

According to court documents and evidence presented at trial, Farkas and his co-conspirators engaged in a scheme that misappropriated more than $1.4 billion from Colonial Bank’s Mortgage Warehouse Lending Division in Orlando, Florida, and approximately $1.5 billion from Ocala Funding, a mortgage lending facility controlled by TBW.   Farkas and his co-conspirators misappropriated this money to, among other things, cover TBW’s operating expenses.   The fraud scheme contributed to the failures of Colonial Bank and TBW.  

“Today a jury convicted Lee Farkas of orchestrating one of the longest and largest bank fraud schemes in the country,” said U.S. Attorney Neil H. MacBride [at sentencing]. “In 2008, Lee Farkas boasted that he ‘could rob a bank with a pencil.’  And he did just that.  His staggering greed led him to steal nearly $3 billion from Colonial Bank and other investors.   Farkas’s mammoth fraud contributed to the toppling of a financial institution and the ripple effects were felt from Wall Street to Main Street.   Now he’s being held responsible for the financial ruin he left in his wake.”

Evidence at trial also established that Farkas and his co-conspirators caused Colonial BancGroup to file materially false financial data with the SEC regarding its assets in annual reports contained in Forms 10-K and quarterly filings contained in Forms 10-Q.   Colonial BancGroup’s materially false financial data included overstated assets for mortgage loans that had little to no value that Farkas and his co-conspirators caused Colonial Bank to purchase.   Farkas and his co-conspirators also caused TBW to submit materially false financial data to the Government National Mortgage Association (Ginnie Mae) in order to extend TBW’s authority to issue Ginnie Mae mortgage-backed securities.

According to court documents and evidence presented at trial, Farkas also personally misappropriated more than $20 million from TBW and Colonial Bank to finance his lifestyle, including purchasing multiple homes, scores of cars, a jet and sea plane, and restaurants and bars.  

Federal prosecutors are still exploring new strategies for criminally charging Wall Street bankers who packaged and sold the bad mortgage loans behind the financial crisis, including using an old law intended to punish individuals for scamming commercial banks. The old law is FIRREA -

FINANCIAL INSTITUTIONS REFORM, RECOVERY AND ENFORCEMENT ACT OF 1989
AN ACT - To reform, recapitalize, and consolidate the Federal deposit insurance system, to enhance the regulatory and enforcement powers of Federal financial institutions regulatory agencies, and for other purposes. Which includes the following provision:

(2)  SPECIAL RULE FOR CONTINUING VIOLATIONS--
In the case of a continuing violation, the amount of the civil penalty may exceed the amount described in paragraph (1) but may not exceed the lesser of $1,000,000 per day or $5,000,000.

It all sounds like too little. But its not too late.U.S. citizens continue to lose their homes to foreclosure despite media proclamations that the foreclosure crisis is well behind us. ITS NOT. Mortgages initiated in recent history, since 2002 or so, are riddled with misrepresentation and fraud. It's not too late to punish those who steal the wealth of U.S. citizens.

Elizabeth Warren: Give Restitution to the Victims of Foreclosure - Repost from Change.org

Dear Elizabeth Warren, 

            There are laws against false advertising, making false promises, and predatory lending. The Banks intentionally broke these laws, causing the Great Recession.

            We, the homeowners of America claim the tortious actions of the Banks have created Unjust Enrichment, evident in the fact that their wealth and size has increased 40% since the Great Recession they caused. The basic purpose of restitution is to achieve fairness and prevent the unjust enrichment of a party.

            In tort law, restitution applies to the measure of damages required to restore the plaintiff to the position he or she held prior to the commission of the tort.

            We, the homeowners wronged by the actions of the Banks, now demand the restitution we deserve.

             We demand that you set up a National Website for us to list the amount of money, and property, each American lost from the intentional criminal acts of the Banks.

            We demand that you make the Banks accountable and return us to the status we were, before being victimized. This is the law. This is fair.

A few descriptions of the fraud:

·           Predatory lending refers to the practice of unscrupulous lenders, to enter into "unsafe" or "unsound" secured loans for inappropriate purposes. A classic bait-and-switch method was used by Countrywide, advertising low interest rates for home refinancing. Such loans were written into mind-numbingly detailed contracts and then swapped for more expensive loan products on the day of closing. Whereas the advertisement stated that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the amount of interest paid. This created negative amortization, which the credit consumer did not notice until long after the loan transaction had been consummated.
·       Countrywide, sued by California Attorney General Jerry Brown for "Unfair Business Practices" and "False Advertising" was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments." When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared.
·       Former employees from Ameriquest, which was United States’ leading wholesale lender, described a system in which they were pushed to falsify mortgage documents and then sell the mortgages to Wall Street banks eager to make fast profits.]There is growing evidence that such mortgage fraud was a large cause of the crisis

      We can now prove, that the mortgage inflation and subsequent collapse was planned.  Millions of Americans were sold predatory loans, solicited into predatory lines of credit, because the Banks persuaded them that it was a sound investment.       

      The Banks coerced Americans into believing their homes were more valuable than they were, and they knew this to be false.

      Essentially, the Banks only cared about getting the loan, securitizing it, and selling it to another Bank. It was a dangerous game of musical chairs, which crashed the world economy yet you have held no one accountable. What is worse, is there has been NO REAL RESTITUTION to the victims, - the homeowners!

            The Mortgage Settlement Act has proven to be a joke.  How can a check for $400 be considered restitution to someone that lost his, or her home, of twenty years? 

           The actions of the Banks; over inflating home values, selling predatory loans, forging documents, and acting with gross disregard to the consumer, are criminal acts, which amounted to the biggest fraud ever perpetrated on civilians in the history of the world.

                              Enough is enough. We demand restitution now!

Petition by

Citizens for Restitution

***

Please go to Change.org and sign this petition. Damage to American homeowners and people worldwide continues.

Get Ready - Foreclosures are heating Up.

The foreclosure world is about to heat up again. Get ready. For reasons I can only guess at the Florida courts are pushing through cases that have been languishing in legal limbo for months and some for years. If you thought that your case had been forgotten, abandoned, or put on the back burner, be aware that it may soon become active.

And, in Florida, if there has been no activity on a case for at least 10 months, the defendant may file a motion to dismiss based on lack of prosecution. Filing the motion may wake the sleeping giant, but the defendant doesn't have a lot to lose in filing.

We are hearing more and more from people in foreclosure because their modification did not go through. More and more homeowners are reporting that they were told they could not qualify for a mortgage modification unless they were behind on their payments. The struggling homeowner then falls behind, sometimes because of the suggestion of the loss mitigation worker - sometimes it just happened, then goes into their trial modification. The trial modification continues for three months. The homeowner dutifully pays the new amount and believes that all is well -- then the lender cancels the modification and begins foreclosure proceedings.  We have heard this scenario repeatedly.

If you are served with a foreclosure complaint be sure to answer it within the 20 day time period. Raise as many affirmative defenses as you can in your answer. Go ahead and raise the affirmative defenses even if they seem to contradict each other.

FIRST AFFIRMATIVE DEFENSE

Although Plaintiff seeks to avail itself of the acceleration remedies available in the Mortgage, Plaintiff has failed to fulfill the necessary requirements enumerated in Paragraph 22 for it to avail itself of the acceleration remedy. Among other requirements, Paragraph 22 requires the Plaintiff as Lender to give notice and an opportunity to cure to Defendant as Borrower, 30 days prior to applying the acceleration remedies and to the institution of any action based on a default of the Mortgage. Plaintiff fails to plead compliance with the notice requirements of Paragraph 22 of the Mortgage.

As the Plaintiff has not met the requirements necessary to bring an action under the
Acceleration Remedies Clause of Paragraph 22 of the Mortgage, this action should be dismissed.

SECOND AFFIRMATIVE DEFENSE

To the extent Plaintiff does not have in its possession the original Note executed by the Defendant, it should be estopped from initiating a foreclosure of the property until such time as the Plaintiff presents the original signed Note before this Court or otherwise shows that the debt in question is owned by Plaintiff.

THIRD AFFIRMATIVE DEFENSE

Plaintiff does not appear to be the proper party in interest in this matter. Defendant demands proof that the Plaintiff was the holder of the Mortgage and Note at the time of filing this action. Plaintiff alleges that it not the owner but is acting on behalf of the servicer. To that end, it appears as if the Plaintiff is not the proper party to maintain this suit. Assuming, for argument purposes only, that the Plaintiff is a true disclosed agent of the owner of the note, it can not sue on its own behalf, rather it can only sue in the representative capacity. See Schurkman v. Stolar, 347 So.2d 653 (Fla. 3d DCA 1977) (Agent lacks standing to sue for debt owed to others on his own behalf).

Based on the documents attached to the Complaint, it appears as if the Plaintiff lacks standing to maintain this action.

***

There are many more possible affirmative defenses that you can raise in your answer. It is appropriate to raise as many as reasonably apply to your situation. If you do not raise a defense in your answer you may be prohibited from using that defense later on.

Research the issues. Research the procedures. No one but you is going to save your home from foreclosure. Consumers that can afford it, hire attorneys to fight the foreclosure. Others go pro se, with or without the help of a legal document preparer. Don't panic, don't hide, and don't become complacent.