Foreclosuregate – U.S. Trustee Taking On Banks in Mortgage Mess – NYTimes

“The U.S. trustee’s perspective is that they exist to stop borrowers from cheating banks. Perhaps they are coming to the realization that banks can also cheat borrowers.”

Fair Game

Don’t Just Tell Us. Show Us That You Can Foreclose

Published: November 27, 2010

AFTER examining their foreclosure practices for flaws in mortgage documentation and other procedures, many of the nation’s largest banks have resumed — or will soon resume — trying to evict defaulted borrowers.

JPMorgan Chase, for example, told investors this month that it had extensively reviewed its foreclosure controls, trained personnel in the unit and started new procedures to ensure that all legal requirements would be met when it moves to seize a property in default.

“If we find any foreclosures in error, we will fix them,” JPMorgan Chase said.

But while banks may have booted a few robo-signers and tightened up some lax procedures, one question at the heart of the foreclosure mess refuses to go away: whether institutions trying to take back a property can prove they even have the right to foreclose at all.

Some in the industry believe that questions about this issue — known as “legal standing” — are trivial. They say it’s just a gambit by borrowers’ lawyers to throw sand in the foreclosure machine. Nine times out of 10, bankers say, the right institutions are foreclosing on the right borrowers.

Maybe so. But the United States Trustee Program, the unit of the Justice Department charged with overseeing the integrity of the nation’s bankruptcy courts, is taking a different view. The unit is stepping up its scrutiny of the veracity of banks’ claims against borrowers, and its approach is evident in two cases in federal bankruptcy court in Atlanta.

In both cases, Donald F. Walton, the United States trustee for the region, has intervened, filing motions contending that the banks trying to foreclose have not shown they have the right to do so.

The matters involve borrowers operating under Chapter 13 bankruptcy plans overseen by the court in the Northern District of Georgia. In both cases, the banks have filed motions with the bankruptcy court to remove the automatic foreclosure stay that results when a court confirms a debtor’s Chapter 13 repayment plan. If the stay is removed, the banks can foreclose.

In one case, the borrower had her Chapter 13 plan confirmed by the court early last month. About two weeks later, Wells Fargo asked the court for relief from the stay so that it could foreclose.

Responding on Nov. 16, Mr. Walton asked the court to deny the bank’s request because it had failed to produce any facts showing that it was entitled to foreclose — either as the holder of the underlying note or as the agent for the holder.

The other case involves a couple who had their Chapter 13 plan confirmed by the court in March 2009. A month ago, Chase Home Finance, a unit of JPMorgan Chase, asked the court for relief from the automatic stay so that it could start foreclosure proceedings.

Again, Mr. Walton objected, asking the court to deny the request on the same grounds as argued in the Wells Fargo matter — in this case, that Chase hadn’t proved that it controlled the note on the property.

Jane Limprecht, a spokeswoman for the trustee program, confirmed that it was ratcheting up its scrutiny on banks’ foreclosure practices.

“The United States Trustee Program is engaged in an enhanced review of mortgage servicer filings in bankruptcy cases to help ensure the accuracy of the claim to repayment,” she said. She declined to comment on specific filings.

A Chase spokesman said the bank is the holder of the note in the Georgia case, giving it standing to file the motion.

A spokeswoman for Wells Fargo said that in its case, it is the trustee of a mortgage security that contains the loan, not the servicer. In its capacity as the trustee for mortgage loans serviced by others, it says it expects those servicers to abide by all required laws, processes and procedures.

Howard D. Rothbloom, a lawyer in Atlanta who represents borrowers in bankruptcy, welcomed the actions by Mr. Walton and said he believes they show a sea change in the United States trustee’s thinking on the foreclosure mess.

“Until now, what we had was homeowners complaining about a lack of due process,” Mr. Rothbloom said. “Now you have the federal government complaining about the abuse of the judicial process. That’s really what was missing before.”

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4 Responses to “Foreclosuregate – U.S. Trustee Taking On Banks in Mortgage Mess – NYTimes”
  1. We have begged ever agency you can think of to help us since 2001, even the U.S. Trustee. After being attacked at work as a U.S. Letter Carrier by a vicious dog in 91″, we filed a chapter 13. Cenlar Federal Savings Loan was given permission to lift the “STAY” on 427 4th St North, located in Texas City, Texas. But they never took possession of the property. It is vacate. We were issued a discharge in 2000. The debt continues in our name to date with MidFirst, it was re-sold 2 different times since 2001. Yes we sued, but Judge Wayne Mallia issued a judgment against us that we sign Midland Mortgage (MidFirst Bank) settlement agreement, which include the re-payment of the 2000 FHA/HUD discharge mortgage debt. The judge would not allow the Lawsuit to go to trial, he is forecing us to sign this contract that we never saw. If we refuse we could go to jail/fine. Attorney Steven Leyh some how filed the unsigned settlement agreement, claiming that we agreed to accept $40,000 for their illegal practices and that we agreed to re-pay the debt. We told the judge that Leyh had lied and 10 years was a long time to be hounded for a discharged debt. The story can be read in the Houston Chronicle, Google “Zombie Debt Refuse To Die, Prince Ella” Can someone tell me how can anyone force a debtor to re-pay a legally discharged fha/hud mortgage debt? What good is a DISCHARGE ORDER? The court has looked on as MidFirst Bank rape me with this discharged debt. But, the case is on APPEAL at the 14th Court of Appeals and the 5th Circuit Court Of Appeals. MidFirst is cold blooded to have bought a 2000 discharged mortgage debt and then attempt to harass, threaten, and collect the debt. We are now almost 60, disabled and it is 15 years since we filed (1995). Today is December 1, 2010, my birthday, but its just another day, a day of war. So, this article is true, 4closurefraud is right on the money. I’m hard pressed to do something out of the norm, I should not have to, but I have no chioce.

  2. trust hater says:

    Looks more like damage control to me, sure it might halt or slow down a few foreclosures, looks more like they are making themselves look pretty by doing this and are infact supporting the banks with this strategy.
    (Are they trying to gain peoples trust perhaps?)

    Worst thing is why don’t they teach people about law i school? they assume the incompetence position in court all the time, but how can that be so, if they never told people how important law was and don’t make it something that needs ot be known about form a young age. (probably because they know how corrupt law is and kids wouldn’t put up with all the nonsense)

    this kind of deception is cruel at best.

    sorry for going off topic, but the fact they don’t teach people law at school from an early age shows just how deceitful they are about everything.

    I’m not convinced about the U.S. Trustee doing anything else other than damage control on their reputation.

  3. This is god if banks start finding it more difficult to foreclose or FRAUD-CLOSE and we make sure they are not over the Law It could make Banksters think more before foreclosing in a Homeowner and may be more willing to do a Loan Modification, as it is right now the incentives for the banks are to foreclose (they collect AIG insurance etc) and commit fraud to foreclosure, We need to make it more balance towards the homeowner Most important a foreclosure home is bad for the economy, The state, The city, Their community, and the american family, When a Loan Modification is approved all the houses around it that property, wont go down on value, It will make that family be more certain about their future , this family start spending money on their home, if they were thinking about buying new furniture, a new stove, a new dish washer, a carpet etc If they are now sure that they are going to stay in their home, they will spend the money and will help all those industries, there is nothing better for the economy than to modify a loan instead of foreclosing

  4. Stupendous Man - Defender of Liberty - Foe of Tyranny says:

    A nice article. I’m pleased to see US Justice, in the form of the Trustees, finally taking some meaningful interests in the issues.

    There are two other cases in which Trustees have put forth some efforts: In Re Wilson in Louisiana and In Re Hill in Pennsylvania. I continue to hope for national media to pick up either of these stories as they involved evidence fabrication and false swearing.

    Some of the pleadings in these cases can be found at:

    Wilson is set for a hearing on the US Trustees Motion for Sanctions against Fidelity/LPS on Wednesday of the coming week – December 1, 2010.

    Hill had a hearing on a motion for sanctions on Monday, November 22, 2010. That hearing has been continued.

    Having sanctions imposed in either of these cases may have deep impact and significance.

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