An Adam Levitin Must Read | The Servicing Fraud Settlement: the Real Game


The Servicing Fraud Settlement: the Real Game

posted by Adam Levitin

Warning: This is a long blog post. But if you follow mortgage servicing, I think you’ll find it worth reading. Despite lots and lots of media coverage of the servicing fraud settlement, nobody seems to understand the real story that’s going on. I think that this post will explain a lot.

Let’s start by recapping what we know.  Back in March we started hearing media reports of a proposed penalty for servicers in the $20-$30B range.  Then the American Banker published a 27-page term sheet from the AGs for servicing standards. Next, Huffington Post published a 7-page CFPB powerpoint presentation. Then came the draft C&D orders and then in April, the final C&D orders (which eliminated the ridiculous “single point of contact which need not be a single person” and replaced it with “single point of contact as hereinafter defined” and then failed—quite deliberately—to define it anywhere in the document).

Now there’s another round of activity and conflicting reporting. The American Banker reported that there was a new AG term sheet proposed and that principal reductions were off the table. That turns out to be incorrect, as Shahien Nasiripour reported in the Huffington Post. The new AG term sheet that the American Banker referenced deals only with servicing standards. The American Banker assumed that this mean that principal reductions were off the table because they weren’t referenced in the term sheet. In fact they are still very much in play. They’re just in a second, separate term sheet. So now there are two separate term sheets–one covering servicing standard and another covering monetary issues/principal reductions. (Recall that the original AG term sheet did not cover the monetary issues—that was clearly for a separate document.) We are also hearing news reports that the banks are offering to settle for $5B and won’t go above $10B.

So how do we make sense out of all of this?

The short answer is that the fight is not over a piddling $5B or $10B or even $20B. The banks would buy peace in a second for $20B and servicing reform. So what does that tell us? It indicates that the negotiations are over a substantially bigger figure than $20B. And this explains everything about the banks’ negotiating strategy including the recent attacks on Elizabeth Warren by the Wall Street Journal’s editorial page and by Congressional Republicans on the CFPB.

Take the time to read this one here…

He may be wrong, but he may be right…


16 Responses to “An Adam Levitin Must Read | The Servicing Fraud Settlement: the Real Game”
  1. Ali says:

    Boy I must be a real dummy! I thought in order to foreclose: 1) they have to prove standing 2) they have to produce a chain of title 3) what about insurance fraud? ( Allstate is sueing). How come we don’t hear about these things in the mainstreet media? $0 How about the banks taking money from the gov’t. for making loan mods that after they got the $ they recinded ? Why has it taken over 3 years to bring any action against homeowners? Could it be that they are waiting for new laws to be passed so they don’t have to answer to all the fraud they commmited ? We are scewed either way, regardless of who wins this election, unless Obama pulls a rabit out of his hat. My head is about to explode and I have already lost 50 pds over this mess, and my DR. says I have the onset of heart desease over this. Maybe thay are waiting for me to die. They already have life insurance policies on my husband and myself. How could this happen. I’m ready for the rubber Ramada!!!

  2. russell cohn says:

    Why does a sovereign nation choose to borrow its own currency from private banks? Clearly the Constitution states that Congress is to issue our currency. Therefore, after finalizing the annual federal budget, Congress could direct the Treasury to issue the funds to fulfill the budget without creating debt. Why is this issue not the number one issue in every economic debate today?

    • l vent says:

      You are absolutely, positively right. The people have to rise up and demand this from Congress or at least those of us who get it. The Federal Reserve Banking system along with Wall Street act as one giant totlitarian imperialist, conglomerate, monopoly that creates NOTHING BUT DEBT, for We The People and insurmountable wealth for the top 1%, themselves and their perps like their CEO’s. This has to stop, they are destroying America’s right to prosperity and want all of us to own nothing at all but of the debt they create. It is an Orwellian plan to create a worldwide serfdom of peasant slaves ruled by the rich. A fascist Plutocracy ruled by Oligarchs… .They hate National Sovereignty, the U.S. Constitution, the U.S. Bill of Rights, they hate our FREEDOM, THEY WANT WORLDWIDE SLAVERY TO THE DEBT THEY CREATE OUT OF THIN AIR. . They are even so sick as to want a paperless, microchipped society of peons who pay for everything throught their microchip and are life long renters with no home ownership, no private businesses or entrapraneurship of any kind., only FOREIGN MULTINATIONAL CORPORATIONS WOULD RULE UNDER THAT FASCISM. NOT IN AMERICA. THEY DON’T OWN AMERICA AND THEY NEVER WILL, UNDER ANY CIRCUMSTANCES THEY MIGHT CREATE TO TRY TO TAKE US OVER. THEY CAN JAM THEIR WORLD CURRENCY UP THEIR INBRED ASSES.

  3. Readdocs says:

    The cycle is about to begin again according to the pressure Obama is now putting on the smaller banks. We’re going to see millions more in foreclosures and the number of bank failures is going to increase.
    This is one way of successfully wrenching away the right of owning private property from the majority of american citizens. Making them renters, and then assigned serfs back to the land owners. By a thousand paper cuts our constitution is being ripped into shreds and our inalienable rights are being torn away from us. We are not so free now, and every day we lose more freedom to those who dream of being tyrants, kings, and emperors. Is there enough percentage to fight against this war of attrition being waged by the communists?
    When the tipping point is reached which side of the point are you going to be on? How much to you believe in and lover America?

  4. l vent says:

    Anyone happen to see that commercial with the admitted socialist, Lawrence O’Donnell on MSNBC? He said we need Global Healthcare? WTF? What a slime bag. He is obviously a NWO piece of garbage. I hope he gets fired. This is America, We The People do not believe in Global anything. National Sovereignty will prevail under the U.S. CONSTITUION and the U.S. BILL OF RIGHTS. Mr. O’Donnell should have to go to work for the commies and work for spit to get free healthcare. What an arrogant piece of shit.

  5. Mad as hell in Maryland says:

    P Nach, I like your idea. Fair. Right. Hmmm.
    Good luck to all, Be well.

  6. Thomas says:

    30 years I was an investigator for a state’s AG. Finally you have pointed out that the AGs are all settling “what”. No investigation, no charges, no names. I never had a case where I went to the AG and said “would you settle this allegation first so I don’t have to do my job”. 50 states with 50 different sets of laws and violations committed within seperate states. No one finds this odd? What would be even more strange is that an alleged criminal settled (with the advise of the best attorneys money can by) something they have not been charged with. Regardless of the amount, what would the alleged crimes be that they in effect are admitting to?

  7. angry & NOT TAKING IT says:

    enough already of this b-ll sh-t says
    that paperwork game is..
    #1- you give them [ 3or 4 times- we lost your docs] what ever financial they do not ALREADY ,
    #2- clock is NOW running WHILE YOU NEED to be in default to qualify for a HAMP MOD “OMG” so you stop paying. 4-6 months
    #3- then 1 of 2 things happens at this point.
    [ a] trial mod .. 2 or 3 payments then SOMETHING goes bad-
    servicer loose the payment or tax & insurance escrow impound absorbs the payment and dont tell you …….or
    [b] oops …. you’ve been denied a loan mod about a 1 month or 2 AFTER they file to foreclose.
    either way you now are 10’s of thousands behind in payments.
    even if you have the $$ to cure the default…they WILL take it & then foreclose…
    but make no mistake …THEY WILL FORECLOSE>>>>> PEROID

  8. angry & NOT TAKING IT says:

    please tell ALL THE PEOPLE YOU CONTACT… there ..I S NOOOOOO LOAN MODS…PEROID !! just stop it!
    you cannot MODIFY that which you do not own . the entire thing was a hoax from the start, it was to allow more time for the banks to write off the toxic bullshit to hide from the public & investor game[stock market] learning of the insolvency of the banks..

  9. angry & NOT TAKING IT says:

    since 90’s no debt ever dies ie.. never paid off “its simply recycled to distressed debt buyers” take a look at the 2007 NY study on court debt collection law suits.. that has been going on 4ever!

  10. enough already of this b-ll sh-t says:

    +-i do not seem to understand what is happening to us. wells fargo tells me they cant help me with a mod until i was im emient default. then i send all the correct paper work i am in review anf then BAM some one hacks into the loan processors computer and moves my file out of review. then they request more paper work. i send it fed ex 10 days before its due. 2 days after the “due date” i get a denial of a hamp loan because i did not send the paper work. i have a trackin number from fed ex and a signee. i complain to theflorida ag, our senator, and the OCC. they did nothing at all to wells fargo. so according to our government it is ok to defraud the american people to collect the insurance ploicy. evey letter wells fargo sends me and the government entities say that my file was never compromised and that i was at fault for not sending the paper work. i only wish i had the money like the trusts ect to sue the bank, i do not . money begets money. it is sad that i am going to lose my house because i do not have money for defense the same reason i am losing the house to begin with . none of this makes sense to me. higher prices thats all you here i am so distraught..

    • l vent says:

      Loan mods are a ruse, your house is paid for free and clear. Do your due dilligence and you will find the proof. .

  11. l vent says:

    Looks like more covering up for the fraud. Just another set up for the homeowners to fail, they just want to make our next failure cleaner and easier for the bastards to steal our homes next time. I am sure there will be a contract for us to sign so they may cover up the underlying fraud and make it impossible for us to win or sue them in the future. WITH THIS SO CALLED DEAL, THESE HOMES WILL NEVER BE PAID FOR. THE DEBT IS UNSUSTAINABLE AND IT DOES NOT EVEN EXIST. Dimon knows the homes are paid for free and clear and so do the rest of the banksters on the American side of the spectrum. Principle reduction being the sticking point is a ruse. Our homes are paid for free and clear because of the Ponzi Scheme SWINDLE AND HEIST. Screw the foreigners, they made hundreds of trillions off of the Ponzi Scheme and got the BAILOUTS FROM THE US TAXPAYER EVEN THOUGH THEY ARE FOREIGN OWNED AND OPERATED MULTINATIONAL CORPS, AS IS GM, and CHRYSLER. THEY COLLAPSED THE MARKETS IN 08 AND IT WAS INTENTIONAL AND IT WAS ALL OUT OF PURE GREED WITH INSIDER TRADING AS THEIR KEY WEAPON OF CHOICE FOR THEIR FINANCIAL WEAPON OF FINANCIAL MASS DESTRUCTION AND TERROR. THEY ARE ALL GREEDY FOREIGN BASTARDS and they ALL suck. GO TO THE YOU TUBE VIDEOS AND SEARCH FOR THE VIDEO ENTITLED: CNBC ILLUMINATI CRASHES STOCK MARKETS. RESCIND OR WE THE PEOPLE WILL SUE THE EFFING PANTS OFF OF ALL OF YOU BASTARDS FOR ALL OF THE FRAUD INCLUDING THE BAILOUT FRAUD. CONGRESS MADE THE AMERICAN PEOPLE PAY FOR THEIR OWN FOREIGN MULTINATIONAL ROBBERY AND THEY STILL ARE WITH THE FEDERAL RESERVE/WALL STREET FINANCIAL TERROR MACHINE.

    • l vent says:


  12. P Nach says:

    Besides principal reductions, there is another way to make the banks pay and ensure that they can’t continue to steal property that doesn’t belong to them:

    Give homeowners the wherewithal to fight back and conduct a “fundraiser” at the same time:

    Pass legislation in each and every state mandating that anyone seeking to foreclose on a property MUST record an unbroken, complete and verifiable chain of title with each and every assignment included.

    Banks without the proper title chain will not be able to foreclose. After a prescribed amount of time (say 2 years) homeowners will be allowed to formally quiet title. Mortgage gone and equity returns in it’s entirety to the homeowner.

    Land records get cleaned up, either with the banks filing and recording the complete chain of title or through quiet title by homeowners.

    Local counties get back all the money they have been cheated out of by MERS and others that have not properly recorded note assignments. Can you spell F.U.N.D.R.A.I.S.E.R? Again, more money comes back to the localities where is belongs from the banks that destroyed our land records in the first place.


  13. Virginia says:

    I think we should just settle for all of the banksters’ patents, TMs and licensing rights since they patent and license just about every step and procedure they do – so they all do it alike… from mortgage to foreclosure, modification to collection… I mean for everything and you must have a license agreement and software to operate…every step… Apparently patents, TMs and licensing worldwide is about a $60 Trillion business – that should suffice, yeah?

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