INSIDE CHASE and the Perfect Foreclosure
“JPMorgan CHASE is in the foreclosure business, not the modification business’.” That, according to Jerad Bausch, who until quite recently was an employee of CHASE’s mortgage servicing division working in the foreclosure department in Rancho Bernardo, California.
I was recently introduced to Jerad and he agreed to an interview. (Christmas came early this year.) His answers to my questions provided me with a window into how servicers think and operate. And some of the things he said confirmed my fears about mortgage servicers… their interests and ours are anything but aligned.
Today, Jerad Bausch is 25 years old, but with a wife and two young children, he communicates like someone ten years older. He had been selling cars for about three and a half years and was just 22 years old when he applied for a job at JPMorgan CHASE. He ended up working in the mega-bank’s mortgage servicing area… the foreclosure department, to be precise. He had absolutely no prior experience with mortgages or in real estate, but then… why would that be important?
“The car business is great in terms of bring home a good size paycheck, but to make the money you have to work all the time, 60-70 hours a week. When our second child arrived, that schedule just wasn’t going to work. I thought CHASE would be kind of a cushy office job that would offer some stability,” Jerad explained.
That didn’t exactly turn out to be the case. Eighteen months after CHASE hired Jared, with numerous investors having filed for bankruptcy protection as a result of the housing meltdown, he was laid off. The “investors” in this case are the entities that own the loans that Chase services. When an investor files bankruptcy the loan files go to CHASE’S bankruptcy department, presumably to be liquidated by the trustee in order to satisfy the claims of creditors.
The interview process included a “panel” of CHASE executives asking Jared a variety of questions primarily in two areas. They asked if he was the type of person that could handle working with people that were emotional and in foreclosure, and if his computer skills were up to snuff. They asked him nothing about real estate or mortgages, or car sales for that matter.
The training program at CHASE turned out to be almost exclusively about the critical importance of documenting the files that he would be pushing through the foreclosure process and ultimately to the REO department, where they would be put back on the market and hopefully sold. Documenting the files with everything that transpired was the single most important aspect of Jared’s job at CHASE, in fact, it was what his bonus was based on, along with the pace at which the foreclosures he processed were completed.
“A perfect foreclosure was supposed to take 120 days,” Jared explains, “and the closer you came to that benchmark, the better your numbers looked and higher your bonus would be.”
CHASE started Jared at an annual salary of $30,000, but he very quickly became a “Tier One” employee, so he earned a monthly bonus of $1,000 because he documented everything accurately and because he always processed foreclosures at as close to a “perfect” pace as possible.
“Bonuses were based on accurate and complete documentation, and on how quickly you were able to foreclosure on someone,” Jerad says. “They rate you as Tier One, Two or Three… and if you’re Tier One, which is the top tier, then you’d get a thousand dollars a month bonus. So, from $30,000 you went to $42,000. Of course, if your documentation was off, or you took too long to foreclose, you wouldn’t get the bonus.”
Day-to-day, Jerad’s job was primarily to contact paralegals at the law firms used by CHASE to file foreclosures, publish sale dates, and myriad other tasks required to effectuate a foreclosure in a given state.
“It was our responsibility to stay on top of and when necessary push the lawyers to make sure things done in a timely fashion, so that foreclosures would move along in compliance with Fannie’s guidelines,” Jerad explained. “And we documented what went on with each file so that if the investor came in to audit the files, everything would be accurate in terms of what had transpired and in what time frame. It was all about being able to show that foreclosures were being processed as efficiently as possible.”
When a homeowner applies for a loan modification, Jerad would receive an email from the modification team telling him to put a file on hold awaiting decision on modification. This wouldn’t count against his bonus, because Fannie Mae guidelines allow for modifications to be considered, but investors would see what was done as related to the modification, so everything had to be thoroughly documented.
“Seemed like more than 95% of the time, the instruction came back ‘proceed with foreclosure,’ according to Jerad. “Files would be on hold pending modification, but still accruing fees and interest. Any time a servicer does anything to a file, they’re charging people for it,” Jerad says.
I was fascinated to learn that investors do actually visit servicers and audit files to make sure things are being handled properly and homes are being foreclosed on efficiently, or modified, should that be in their best interest. As Jerad explained, “Investors know that Polling & Servicing Agreements (“PSAs”) don’t protect them, they protect servicers, so they want to come in and audit files themselves.”
“Foreclosures are a no lose proposition for a servicer,” Jerad told me during the interview. “The servicer gets paid more to service a delinquent loan, but they also get to tack on a whole bunch of extra fees and charges. If the borrower reinstates the loan, which is rare, then the borrower pays those extra fees. If the borrower loses the house, then the investor pays them. Either way, the servicer gets their money.”
Jerad went on to say: “Our attitude at CHASE was to process everything as quickly as possible, so we can foreclose and take the house to sale. That’s how we made our money.”
“Servicers want to show investors that they did their due diligence on a loan modification, but that in the end they just couldn’t find a way to modify. They’re whole focus is to foreclose, not to modify. They put the borrower through every hoop and obstacle they can, so that when something fails to get done on time, or whatever, they can deny it and proceed with the foreclosure. Like, ‘Hey we tried, but the borrower didn’t get this one document in on time.’ That sure is what it seemed like to me, anyway.”
According to Jerad, JPMorgan CHASE in Rancho Bernardo, services foreclosures in all 50 states. During the 18 months that he worked there, his foreclosure department of 15 people would receive 30-40 borrower files a day just from California, so each person would get two to three foreclosure a day to process just from California alone. He also said that in Rancho Bernardo, there were no more than 5-7 people in the loan modification department, but in loss mitigation there were 30 people who processed forbearances, short sales, and other alternatives to foreclosure. The REO department was made up of fewer than five people.
Jerad often took a smoke break with some of the guys handing loan modifications. “They were always complaining that their supervisors weren’t approving modifications,” Jerad said. “There was always something else they wanted that prevented the modification from being approved. They got their bonus based on modifying loans, along with accurate documentation just like us, but it seemed like the supervisors got penalized for modifying loans, because they were all about finding a way to turn them down.”
“There’s no question about it,” Jerad said in closing, “CHASE is in the foreclosure business, not the modification business.”
Continue on here…
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everyone must remember these loans were sold as securities with insurance, the banks get paid from the insurance if you default then get paid even more after they foreclose and sell your home again
Lawyers are allowing problems in the foreclosure mill chaos and unsuspectingly adding to the Tax Deed Sales period crunch that is soon coming. Creditors are so fearful of tax sales actions that they are subsequently relenting, letting local authorities and nonprofit organizations get a hold of homes up front of an open market investor by a issuing a $1 billion package for all states via the Obama government. Our tax dollars (which we haven’t even earned yet) will pay for the interest on the loan the government took out from the fed. This is not designed to help the destitute but to prevent a massive tax deed sell off.
Michael & Elyse – This is how I explain the economic catastrophe, collapse, etc. to our clients in a simple history lesson with a true but interesting twist (kinda sounds like the 4 lil’ pigs & the wolves):
Banking deregulation started in 1982 under Reagan; in the early 1990’s 4 guys, along with Fannie and Freddie created the concept for a company called MERS. One guy who was the original CEO (after the company was set up and running), left and went to JP Morgan Chase as Sr. VP and then, in 2005 became Sr. VP of Freddie Mac. The #2 original guy’s background was as finance & operations director for Harrah’s Casino and he left and started MortgageFlex… which leaves 2 other original guys and Fannie and Freddie…
Then in 1994, when they realized that to make MERS* more efficient – they needed more deregulation. So, the Republican Congress under Clinton passed yet another deregulation law allowing banks to operate inter-state…setting up offices anywhere in any state (i.e. Wells Fargo, IndyMac, WaMu, Chase); but that wasn’t enough so they lobbied for more deregulation – not only with federal legislators but also at state levels to change statutes to accommodate their plans. This was about 1996 – 1998…
Now, if you will recall, President Clinton didn’t like this last proposed legislation and starting speaking publicly about it around 1997… And remember what happened to President Clinton in 1998??? Right, Monica Lewinski. Which is all you heard on the news media because…. (a piece of the puzzle) the broadcast airwaves had also been deregulated in the 1990s and now had become property rights instead of public trusts… and where did the money come from for the media moguls to buy up all the broadcast stations??? …Right, Wall Street. So who controls the media and the breaking news stories? … Right, Wall Street.
And so, under the Republican Congress in 1999, another banking deregulation legislation was passed allowing banks to interface with investment firms (foreign money) and insurance companies (AIG and foreign money), signed by President Clinton. And this allowed the banks the opportunity to securitize the mortgages and sell them all over the world… and who would profit from this??? …Right, Wall Street.
Who is Wall Street? That’s a scary thought. White collar criminals with a lot of money to influence a lot of people. They spent what amounts to $2 million per member of Congress last year lobbying. Again, I want to stress that just because we understand a lot of this and apparently not all of it… doesn’t mean that your Congressional Representatives are as astute… the leading US Senators probably are – but in most states – the US Senators call the shots – so if you are a House Rep. you don’t vote against them or you don’t get re-elected because the US Senators have ties to a lot of money to help fund your campaign… and where does it probably come from (or a lot of it) ??? … Wall Street. It doesn’t matter if they are Republican or Democrat – it appears they can just be bought at the right level.
*MERS is apparently just a model because it looks like all the investment firms had the same inside engine model system too.
Great Story
Anything on Wells Fargo or CitiMortgage?
Stan
Racin, WI.
Elyse – I was an early Obama supporter; gave me lots of money way back when he was a long-shot. I was star-struck back in the prior Democratic convention, and I still sometimes watch his speeches.
I know that the Republicans are the source, the root, of the problem; that’s a given. But Obama has just supported the same policies. This is the biggest fire, by far, and he’s pouring fuel onto it by continuing to finance the foreclosures through Fannie & Freddie and the bailouts. No bailouts = no financial incentive to foreclose (actually a disincentive). Obama is supporting them; there’s just no question of that anymore, and it angers and saddens and bothers me. He could just veto anything that throws money to the banks; he doesn’t. But it is what it is. We have to hold our own accountable and so far he’s a lousy President on the economic crisis that’s the US’s #1 priority: he’s not acting any differently than Bush wold have.
Since the REO sale won’t bring in more than the Fair Market Value (FMV) of the home the investors should prefer to modify the loan to FMV; they get the same amount then don’t have to pay the legal fees.
Of course, if somebody else was covering the losses — say, maybe, the US Treasury using our money — then it’d make sense to push the homes through foreclosure because you’d get the face value of the funny-money mortgage, taxpayers would cover the fees, and you’d get a little more when you resold the place. Great use of taxpayer money; to produce mass homelessness.
Thanks Obama; Hope & Change, huh? Hope, yeah .. for bankers. Change? I can’t imagine Bush would’ve acted any worse.
Michael,
President Obama is NOT to blame for Bush’s de regulation of the Wall Street Banksters…If you find it necessary to blame someone, don’t blame our new President who is stomping out as many fires as he walked into.
If you want justice, file a lawsuit and sue the banksters, they are to blame and Bush and Chaney are the ring leaders! Get your facts straight before you post something that rings of raceizm! So many Republicans hate our new black President only because he is black! We voted him into office to fix what the Republican’s screwed up….Our Country was sold out to foreign investors and the President is addressing each issue, one by one!
You do realize it was the Republicans who outsourced millions of American jobs and they are now fueling attacks on the President for the lack of jobs? Wall Street Banksters are bringing down America and not one gun shot was fired!!
Thanks Republicans…you succeeded in ruining the United States Of America….
Elyse,
Are you really going to claim that anyone who doesn’t agree with Obama is a racist? Are you actually serious? It’s incredibly simple to dislike his policies and “results”: Obama hasn’t managed to effectively provide solutions to a single major issue that our country has or is facing. We didn’t elect a president to spend 4 years making up excuses for how the last guy wrecked everything. This recession has lasted longer than any other in history, and has cost us and our children significantly – that’s on Obama’s shoulders, not anyone elses.
You may also want to open the history books yourself. Banking deregulation was begun under Clinton as the Community Reinvestment Act: it was meant to try and encourage banks to lend to low-income individuals who normally wouldn’t qualify for loans by backing a higher percentage of the loans. Unfortunately, no one had the logic to realize that they didn’t qualify for the loans because they couldn’t afford them. Works well when the real estate market is soaring and you can sell your home for more than you purchased it (even with no money down). Wreaks havoc during times like this (which we naturally cycle through every 10-15 years).
Read at least one history book before you start spewing your ignorant racism comments.
To Elyse:
With all do respect for your point of view concerning whom to blame for our economic calamity! This is not a Republican or a Democratic demise, It’s an elitist few whom have controled politicians for over a 100 yrs. Any time “We the people” go to sleep and alow politicians to control coining money and controling fiscal and monitory policy we are asking for our own demise.
The date was 1913 the place was Jackle Island where the crime took place. This is off the coast of Georga. A hand full of bankers from europe and New York met to discuss implementing fractural banking.
our president at the time went along with this plan and thus started The termite distruction of our currency. Taxing through creating more dollars chasing fewer goods and services. They create money out of thin air thus stealing from future gernerations.
If we are ever to get back to ground zero we must abolish the Federal reserve. They want to enslave us all through fiscal and monitory policy. The bigger plan is even more hedious, they want to illinate four fiths of world population.
It sounds bazar, but all you have to do is get a copy of “The creature from jackle Island by Griffin” and he gives a clear history of these elite family’s from around the world whom want to enslave you. It not about money, It’s about controling the serfs like the fifteem century in England. A two class system. 500,000,000 to serve them and get rid of the rest.
I am afraid that if we do not turn this tied of bigering between Republican or Democrat we would have lost focus on whom is really to blame. “my soulution is to start with auditing the Fed, then abolishing that monster. we the people need to hold both sides of the isle responsible for their treasonist actions.
You have to understand they have control of the media and can manipulate the masses. They have infiltrated our schools, our media, our goverment, and will distroy our freedoms at any cost. So bugle up and become an independant cause both sides have rotten apples.
Please have Jared contact me. I live in Beaumont, Ca. Our organization seems to be able to get the ultimate revenge with institutional lenders. Recently my neighbor, Richard contacted me because his good friend, Lola, had lost her 4000 SF house in a foreclosure sale. She and her husband, Lou have recently been served for eviction. It appears that we can wipe out the illegal loan and give them back their $625,000 home with a loan of $150,000 interest only for five years.
We will also wipe out any bad credit associated with the fraudulent loan. Incidently California has a one year redemption period for any property lost ion a foreclosure sale where a fraudulent loan is involved.. Grampa Jack
Hey Grampa Jack,
I live in Rancho Mirage, Ca. and would appreciate hearing from you.
elyse@gte.net
This is to Jack W. Dopp,
I live in Mendocino County Ca. I have a refi. loan that originated w/ WAMU now CHASE.
I purchased my home in 2004, Paid for. Then in 2005 I got a law suit (lien) placed against my
property. Having until 2008 to pay it off. That is where I ended up with said preditory loan.
I am having trouble finding proper legal representation , could you please help, Thank-you
Hope that this young man, father and his wife are able to support their family going forward… his tale tells a bigger story here…
I don’t want to sound naive – but after talking to Congressional Reps and their assistants all over the country for the last serveral weeks – they are/were not up to speed. Pat yourselves on the back for being astute enough to understand the complexity of this subject. The in-depth study and research takes a great deal of fortitude and you likely wouldn’t have bothered other than for the fact that you had a mortgage foreclosure.
These folks in Washington, DC get a paycheck, on time without fail. Even bright lawyers haven’t bothered to look at this – and don’t want to be bothered with the details. My son’s economic professor had never heard of MERS or mortgage-backed securities until his student provided the information. People in government are not in foreclosure – they get a paycheck, their hours have not been diminished and they don’t directly depend on the economy to make a living. Its up to each and every one of us to take the time to educate the government and the courts – with good arguments and information.
The otherside of the coin is the fact that if they understand anything at all – they are afraid of a complete collapse of our economy – so we have to give them alternatives and scenerios that they can support. If I had the money I’d send every State & Federal Court Judge in the country a copy of THE BIG SHORT – or send it to my Congressional Reps and make them promise to read it and then give it to a judge. Short of striking deals with the Investors – we have to push for legislation and depend on the Courts to be honorable, ethical and astute.