COP Report – Congressional Oversight Panel Report on Foreclosure Fraud

Congressional Oversight Panel

Examining the Consequences of Mortgage Irregularities Frauds for Financial Stability and Foreclosure Mitigation

Executive Summary*

In the fall of 2010, reports began to surface alleging that companies servicing $6.4 trillion in American mortgages may have bypassed legally required steps to foreclose on a home.  Employees or contractors of Bank of America, GMAC Mortgage, and other major loan servicers testified that they signed, and in some cases backdated, thousands of documents claiming personal knowledge of facts about mortgages that they did not actually know to be true. Allegations of “robo-signing” are deeply disturbing and have given rise to ongoing federal and state investigations.  At this point the ultimate implications remain unclear.  It is possible, however, that “robo-signing” may have concealed much deeper problems in the mortgage market that could potentially threaten financial stability and undermine the government‟s efforts to mitigate the foreclosure crisis.  Although it is not yet possible to determine whether such threats will materialize, the Panel urges Treasury and bank regulators to take immediate steps to understand and prepare for the potential risks.

In the best-case scenario, concerns about mortgage documentation irregularities Frauds may prove overblown.  In this view, which has been embraced by the financial industry, a handful of employees failed to follow procedures in signing foreclosure-related affidavits, but the facts underlying the affidavits are demonstrably accurate.  Foreclosures could proceed as soon as the invalid affidavits are replaced with properly executed paperwork.

The worst-case scenario is considerably grimmer.  In this view, which has been articulated by academics and homeowner advocates, the “robo-signing” of affidavits served to cover up the fact that loan servicers cannot demonstrate the facts required to conduct a lawful foreclosure.  In essence, banks may be unable to prove that they own the mortgage loans they claim to own.

The risk stems from the possibility that the rapid growth of mortgage securitization outpaced the ability of the legal and financial system to track mortgage loan ownership.  In earlier years, under the traditional mortgage model, a homeowner borrowed money from a single bank and then paid back the same bank.  In the rare instances when a bank transferred its rights, the sale was recorded by hand in the borrower‟s county property office.  Thus, the ownership of any individual mortgage could be easily demonstrated.

Nowadays, a single mortgage loan may be sold dozens of times between various banks across the country.  In the view of some market participants, the sheer speed of the modern mortgage market has rendered obsolete the traditional ink-and-paper recordation process, so the financial industry developed an electronic transfer process that bypasses county property offices.This electronic process has, however, faced legal challenges that could, in an extreme scenario, call into question the validity of 33 million mortgage loans.

Further, the financial industry now commonly bundles the rights to thousands of individual loans into a mortgage-backed security (MBS).  The securitization process is complicated and requires several properly executed transfers.  If at any point the required legal steps are not followed to the letter, then the ownership of the mortgage loan could fall into question.  Homeowner advocates have alleged that frequent “robo-signing” of ownership affidavits may have concealed extensive industry failures to document mortgage loan transfers properly.

If documentation problems prove to be pervasive and, more importantly, throw into doubt the ownership of not only foreclosed properties but also pooled mortgages, the consequences could be severe.  Clear and uncontested property rights are the foundation of the housing market.  If these rights fall into question, that foundation could collapse.  Borrowers may be unable to determine whether they are sending their monthly payments to the right people.  Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments.  Multiple banks may attempt to foreclose upon the same property.  Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out.  Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home.  If such problems were to arise on a large scale, the housing market could experience even greater disruptions than have already occurred, resulting in significant harm to major financial institutions.  For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses.

Documentation irregularities fraud could also have major effects on Treasury‟s main foreclosure prevention effort, the Home Affordable Modification Program (HAMP).  Some servicers dealing with Treasury may have no legal right to initiate foreclosures, which may call into question their ability to grant modifications or to demand payments from homeowners.  The servicers‟ use of “robo-signing” may also have affected determinations about individual loans; servicers may have been more willing to foreclose if they were not bearing the full costs of a properly executed foreclosure.  Treasury has so far not provided reports of any investigation as to whether documentation problems could undermine HAMP.  It should engage in active efforts to monitor the impact of foreclosure irregularities, and it should report its findings to Congress and the public.

In addition to documentation concerns, another problem has arisen with securitized mortgage loans that could also threaten financial stability.  Investors in mortgage-backed securities typically demanded certain assurances about the quality of the loans they purchased: for instance, that the borrowers had certain minimum credit ratings and income, or that their homes had appraised for at least a minimum value.  Allegations have surfaced that banks may have misrepresented the quality of many loans sold for securitization.  Banks found to have provided misrepresentations could be required to repurchase any affected mortgages.  Because millions of these mortgages are in default or foreclosure, the result could be extensive capital losses if such repurchase risk is not adequately reserved.

To put in perspective the potential problem, one investor action alone could seek to force Bank of America to repurchase and absorb partial losses on up to $47 billion in troubled loans due to alleged misrepresentations of loan quality.  Bank of America currently has $230 billion in shareholders‟ equity, so if several similar-sized actions – whether motivated by concerns about underwriting or loan ownership – were to succeed, the company could suffer disabling damage to its regulatory capital. It is possible that widespread challenges along these lines could pose risks to the very financial stability that the Troubled Asset Relief Program was designed to protect.  Treasury has claimed that based on evidence to date, mortgage-related problems currently pose no danger to the financial system, but in light of the extensive uncertainties in the market today, Treasury‟s assertions appear premature.  Treasury should explain why it sees no danger.  Bank regulators should also conduct new stress tests on Wall Street banks to measure their ability to deal with a potential crisis.

The Panel emphasizes that mortgage lenders and securitization servicers should not undertake to foreclose on any homeowner unless they are able to do so in full compliance with applicable laws and their contractual agreements with the homeowner.

The American financial system is in a precarious place.  Treasury‟s authority to support the financial system through the Troubled Asset Relief Program has expired, and the resolution authority created by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 remains untested.  The 2009 stress tests that evaluated the health of the financial system looked only to the end of 2010, providing little assurance that banks could withstand sharp losses in the years to come.  The housing market and the broader economy remain troubled and thus vulnerable to future shocks.  In short, even as the government‟s response to the financial crisis is drawing to a close, severe threats remain that have the potential to damage financial stability.

Full report below…


I sure could use some…


Congressional Oversight Panel Report on Foreclosure Fraud
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13 Responses to “COP Report – Congressional Oversight Panel Report on Foreclosure Fraud”
  1. Michael Drouin says:

    My case is being litigated in the US District Court , District of NH . As I will be approaching fifty thousand dollars to fully litigate my case , the defendants just filed a Protective Order with the Court while they are continuing not to participate in discovery . We have one of the most Fraudulent Assignments used to foreclose on an american family and now they have brushed that aside to use the flawed pooling and service aggreement to close the case . I need corperate prayer over these matters in hope that thier behavior will be exposed to the Court . Thank you

  2. usjustice4all says:

    That is really upsetting that it says in the fall of 2010! I’ve heard about this since early last year!!!! No one wants to bother. They do not realize this effects all of us AND when talking about Financial Stability and the Forclosure Mitigation. It is one in the same. Financial Stability does not come from Banks having money and no one to be able to afford it. It does come from employed persons purchase power times Billions of Americans.

  3. Ohioan says:

    Here is the text of my email to Adam J. Levitin who spoke up at the Congressional hearing today:

    “Thank you so much for your clear presentation of the economic issues at the heart of the mortgage crisis at the Congressional Hearing today. It all goes back to the inflated home values (that could not be supported by homeowner payments) that now have to be deflated. As you vividly explained, the real question is how to split the pending losses among the various parties involved. As was evident at the hearing, the bankers at the table (and some of the senators) are still trying to hide all this under the table, but I have no doubt the issue will come to a head sooner or later. …….I applaud your good work for the benefit of your fellow citizens! Please keep it up.”

  4. The financial industry KNOWS EXACTLY the ploy that was planned years back. This ploy was spread through-out ALL involved with the financial industry…including the government. They all left dirty hand prints on the wall and left the rotten egg on their faces. Their cocky arrogance of to big to fail was a cover-up just as the intimidation practiced through-out the industry. The party is over Big Shots, you can wash the egg off your face now..we all know who you really are……. and who your backers were. The world now knows the truth..that fraud and corruption ..a big ponzi scheme…was pulled…for the act of greed. This ponzi scheme was world we in America are not alone. Madoff was a peach compared to what the financial industry did and he is in prison. The fraud was done…proven..the greed ran so thick in the blood it couldn’t get thru the veins to the brain to function…. laws, regulations and requirements all ingnored…to run your ponzi business. Life in prison as Madoff got, and stripped of all gained , needs to be the ‘award ‘ given to the biggest crooks and liars on the face of this earth. Now for the indictnents…………..this fight is not over.

  5. Gabe says:

    In case you missed the Senate Hearing on MORTGAGE SERVICES AND FORECLOSURE PRACTICES.

  6. l vent says:


    • yvonne says:

      I agree…GOd is allowing all this ugliness to be exposed…He did say what is done in the dark shall be revealed in the light…also…we need to keep the faith and come in right agreement that everything will work out for our good and to His glory…He also did say we will dwell in houses we have not built…but to be sure to give Him the glory…if indeed our signatures created the negotiable instruments where there was none before and if indeed the selling of these notes for ourageous sums or insured for more than 5 times the valoue…well, then,…there is more exposure coming regarding the insurance companies and who were the ones that allowed all this to happen…how far back does this go?

      THe banks foreclosing and that were bailed out are all foreign banks…trying to avoid the anti trust laws by keeping the same names of the banks they acquired…and continue to deceive the American people…go figure…dont take my word for it…research the ownerships, etc…

  7. sonya Brewer says:

    Mr. Berkland,

    Your report was insufficient to say the least, I have all the proof that is needed to collapse 517 million dollar certificates, who will bear the burden. I will not stop till I expose the massive fraud and corruption that exist. I have the proof as I explained in my last email. I have the Note, I have a sworn affidavit that states the written assignment NEVER happened, the lost note is only an indemnification no where was they a conveyance of right title and interest. I will Use the Media to find the investors, if there is one with improper documents , they are many. The Investors were DECEIVED and So was the Court ! Fraudulent ,unlawful ,assignment of record I will find every Investor and give them this info like I tried to give you, This is just the beginning of a major financial disaster. Unlike The BANKS I DO Have ALL the ORIGINALS, can’t wait to help out the Investors tear down the “Too Big to Fail’ . Remember the Nursey Rhyme Humpty DUMPTY;sat on the wall Humpty Dumpty , had a great fall. I’m not waiting on the BIG BANK to Fall, I’m gonna PUSH THEM OFF.

    Thanks, Please feel free to pass this email along like you did the other as a matter of fact Make sure you pass it right on along to The Bank Of New York Mellon , and JP Morgan Chase I will find the Investors and we will join suit against the “TOO Big To Fail”, “Too Big To Prosecute!!! ”

    Sonya Brewer

    —–Original Message—–
    From: Berkland, Adam (COP)
    Sent: Thu, Nov 4, 2010 5:29 pm
    Subject: Response from the Congressional Oversight Report

    Ms. Brewer,

    Thank you for contacting us with concerns about irregularities surrounding the documentation of your mortgage loan. The housing market has been reeling across the country right now due to concerns about these irregularities, as investors, servicers, and homeowners try to sort out the technical issues, and government agencies launch investigations into allegations of fraud.

    The Panel is currently working on the foreclosure documentation crisis, with a focus on its effect on TARP investments and initiatives, as the topic for our upcoming November report that is due to come out in just a few weeks. Because of the high degree of relevance of your comments to our work on that report, I will be sure to pass along your e-mail to staff members here, and we’ll be sure to take your thoughts into account in our ongoing oversight work.

    The Panel is not empowered to assist individuals directly or intervene in disputes with servicers or banks, so if you are looking for assistance in pursuing an investigation into this issue, I would encourage you to call either your state’s Attorney General (AGs in all 50 states have opened investigations into the irregularities as you may know), or to your Representatives in Congress.

    Thanks again for your e-mail, and please let me know if you have any further questions.


    Adam A Berkland

    Staff Assistant / Director of Correspondence

    Congressional Oversight Panel

    Office: 202-224-9925


  8. Pam Edwards says:

    Thier really stupid just found out my loan [under water] and in foreclosure as of March of this year only to find out GMAC sold my loan to USBank who then sold it back to GMAC.Are you kidding me who in thier right mind would buy an under water mortgage and then sell it back to the person that still can not prduce the note anyway.Talk about your mild case of fraud on going and still evidentley being pursued to the fullest .Wow I’m absolutely speechless.

  9. Deni gillespie says:

    Will any of u be at yhe hamp event on west palm today nov 16 1-7 at the palm beach convention center? We lost our home a month ago nut Sps invited us and I’m going. I would love to meet any of you who are fighting back. I van ne reached by phone or text at 772-285-5917. I plan to be there at 2:00 pm.
    Please get on touch especially if you are familiar with SPS. Either way.

  10. J A says:

    Michael, I’ve read through most of this report; thanks for posting it. If the government fails to take action on homeowners’ behalf either at the state level or the federal level, then our best bet (those of us who have already lost our homes) is to file a Common Law Fraud Claim against the bank (see page 35 of the congressional report). I have distilled the 5 points it mentions that must be in place in order for such a claim to rightfully be filed. My case, in particular, satisfies all five points. I bet this will be true for a lot of other cases as well:


    Common Law Fraud (see page 35 in the Congressional Oversight Panel Report)

    In order to prove common law fraud, the plaintiff (the wronged borrower/homeowner filing a lawsuit after foreclosure has already occurred) must establish five elements concerning the respondent (the bank or mortgage lender):
    1) That the respondent (bank) made a material statement (the terms of the loan that the borrower signed)

    2) That the statement made by the respondent (bank) was false (the bank/sub-prime lender over-inflated property appraisal amounts, borrower’s income, borrower’s assets, and so on)

    3) That the respondent (bank) made the statement with the intent to deceive the plaintiff/borrower (i.e., the bank/mtg company knew they were offering loan terms that they planned to change later after borrower’s signing at closing)

    4) That the plaintiff (borrower) relied on the respondent’s (the bank’s) false statement (the bank/sub-prime lender used the false statements in the original loan documents, which they had made with the intent to deceive, to set borrowers up to fail, thus being able to move on to the next step speedily – foreclosure)

    5) That the plaintiff (borrower) suffered injury as a result of that reliance (the borrower/homeowner lost his/her home, a primary asset, because of being unable to make fraudulently increased monthly payments due to false statements of the respondent/bank/mortgage lender after loan closing).

    I think everyone already foreclosed on needs to go through their original loan docs with a fine-toothed comb and find all the ways they were defrauded by the bank right from the beginning of the loan origination process.

    J A
    an editor and a defrauded homeowner who believes in justice 🙂

  11. l vent says:


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