Nye Lavalle is best known for his sports predictions. With his family, he founded Sports Marketing Group and stunned many sportswriters with his accurate calls on the popularity of figure skating and NASCAR in the 1990s, among many others. Sixteen years ago, he began investigating mortgage fraud when a bank attempted to wrongfully foreclose on a family property. Many of the issues he uncovered more than a decade ago, like robosigning, are just being recognized today. He continues to try educate others about problems in the banking industry and the US economy.
Jennifer Barry: Could you tell me a little bit about how you got interested in the whole mortgage fraud and predatory lending?
Nye Lavalle: Sure. Just to give you an idea, my email, firstname.lastname@example.org, has been in existence, since about 1995.
JB: That’s a very long time.
NL: It all started the night my mom and dad Anthony and Matilde Pew owned a home in Dallas, Texas, that we used for our family business called Sports Marketing Group. And I had a place in New York and LA, and we were eventually going to retire to that home at first blush. But we purchased the home, and my family had money, and I had money, we were a business, and basically, soon after we closed on the loan, the bank SOA just started doing all sorts of stupid things. Nobody resided full-time in the home, and they were instructed to send the payment statements to Michigan so that they could get paid on time, and they never sent them there. They sent them to the property address and somebody wasn’t on the property for sometimes two to three months. And they wouldn’t change the address. They wouldn’t take off the late fees, then when I would pay bills on time at the bank, it turned out that they would send the payments from the bank to California to the posting center, and they wouldn’t get posted for 10 more days, even though you paid it on time at the bank. And then they would put another late fee onto the account.
Then, when we had insurance and we paid on a quarterly basis, they would send cancellation notices 30 days ahead. The bank would force place another insurance policy on the property even though we had our own insurance on it. And the long and short of it’s all in a report I created called “Predatory Grizzly ‘Bear’ Attacks Innocent, Elderly, Poor, Minorities, Disabled & Disadvantaged!” They were just churning the account, just trying to make fees and money all over the place.
What we learned years later in litigation is that our account was red-flagged for fraud. The loan officer who approved the loan and did all the documentations had taken blank applications that my folks signed, and put as monthly income from my family, US$100,000 a month, when that was their annual trust income.
So they were trying to do what we call manufacture a default. A lot of servicers do that because they want to foreclose on the house. They want to get rid of the liability because that mortgage has been tainted or it becomes instead of A paper, B, C, or D paper.
It’s called a scratch and dent mortgage.* It’s kind of like a refrigerator, it gets that name kind of like from a refrigerator or stove at the store that somehow gets dented and damaged during transit, and it’s not as valuable as the perfect condition new appliance.
NL: So after that we went to pay off the note. We go look, this is crazy, we don’t want to do business with you, we just want to pay you off. They wouldn’t meet with us. We asked for servicing records. They sent us records that made no sense. We offered to pay them in cash in 14 days on two conditions: that they could come up with records of what we actually owed them, it was about a $100,000 note, and that they could provide us the original note, stamped, cancelled and paid in full. I knew how banking worked because I had represented some banks. Well the servicing records they gave us, the year end balances were like $5,000 off, I mean literally. And they showed and proved our point that when we had insurance on the property, not only did they put one forced place policy on top of our insurance that we had, but they put two more on top of the one that they had, so they actually had three policies on top of each other.
NL: And that was just a mess. And it was really, they were cooking the books is what I learned. And when I got all the information and gave it to them and said look, we want to get rid of you, they assigned it to a company called EMC Mortgage, which was a unit of Bear Stearns. EMC initiated foreclosure, and we initiated a defense to that, and over the years they spent $2.5 million and 7 years in litigation on a $100,000 loan.
You can catch the rest of the interview here…