Author: dmedstrom

Reverse Engineering and Failure Analysis - Reverse Engineering Wall Street

Nevada Attorney General Sues Lender Processing Services for Consumer Fraud

Nevada Attorney General Sues Lender Processing Services for Consumer Fraud

By Daniel Edstrom
DTC Systems, Inc.

The Nevada Attorney General released the following information today:

Carson City, NV – Attorney General Catherine Cortez Masto announced today a lawsuit against Lender Processing Services, Inc., DOCX, LLC, LPS Default Solutions, Inc. and other subsidiaries of LPS (collectively known “LPS”) for engaging in deceptive practices against Nevada consumers.

The lawsuit, filed on December 15, 2011, in the 8th Judicial District of Nevada, follows an extensive investigation into LPS’ default servicing of residential mortgages in Nevada, specifically loans in foreclosure. The lawsuit includes allegations of widespread document execution fraud, deceptive statements made by LPS about efforts to correct document fraud, improper control over foreclosure attorneys and the foreclosure process, misrepresentations about LPS’ fees and services, and evidence of an overall press for speed and volume that prevented the necessary and proper focus on accuracy and integrity in the foreclosure process.

“The robo-signing crisis in Nevada has been fueled by two main problems: chaos and speed,” said Attorney General Masto. “We will protect the integrity of the foreclosure process. This lawsuit is the next, logical step in holding the key players in the foreclosure fraud crisis accountable.” Continue reading “Nevada Attorney General Sues Lender Processing Services for Consumer Fraud”

SEC CHARGES FORMER FANNIE MAE AND FREDDIE MAC EXECUTIVES WITH SECURITIES FRAUD

SEC CHARGES FORMER FANNIE MAE AND FREDDIE MAC EXECUTIVES WITH SECURITIES FRAUD

By Daniel Edstrom
DTC Systems, Inc.

The Securities and Exchange Commission just released the following information:

Companies Agree to Cooperate in SEC Actions

FOR IMMEDIATE RELEASE
2011-267

Washington, D.C., Dec. 16, 2011 — The Securities and Exchange Commission today charged six former top executives of the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) with securities fraud, alleging they knew and approved of misleading statements claiming the companies had minimal holdings of higher-risk mortgage loans, including subprime loans.

Fannie Mae and Freddie Mac each entered into a Non-Prosecution Agreement with the Commission in which each company agreed to accept responsibility for its conduct and not dispute, contest, or contradict the contents of an agreed-upon Statement of Facts without admitting nor denying liability. Each also agreed to cooperate with the Commission’s litigation against the former executives. In entering into these Agreements, the Commission considered the unique circumstances presented by the companies’ current status, including the financial support provided to the companies by the U.S. Treasury, the role of the Federal Housing Finance Agency as conservator of each company, and the costs that may be imposed on U.S. taxpayers. Continue reading “SEC CHARGES FORMER FANNIE MAE AND FREDDIE MAC EXECUTIVES WITH SECURITIES FRAUD”

US Bank is not the Note Holder – North Carolina: Bass vs. US Bank

US Bank is not the Note Holder – North Carolina: Bass vs. US Bank

By Daniel Edstrom
DTC Systems, Inc.

This case is listed here without comment.  The issues of endorsements, allonges, burden of proof, etc. are raised here and are very illuminating.

In the Matter of the foreclosure of a Deed of Trust executed by Tonya R. Bass in the original amount of $139,988.00 dated October 12, 2005, recorded in Book 4982, Page 86, Durham County Registry,
Substitute Trustee Services, Inc., as Substitute Trustee,

No. COA11-565.

Court of Appeals of North Carolina.

Filed: December 6, 2011.

K&L Gates, LLP, by A. Lee Hogewood III, and Brian C. Fork for Petitioner-appellant.

Legal Aid of North Carolina, Inc., by E. Maccene Brown, Gregory E. Pawlowski, John Christopher Lloyd, and Andre C. Brown, for Respondent-appellee.

ROBERT N. HUNTER, JR., Judge.

U.S. Bank, National Association, as Trustee, c/o Wells Fargo Bank, N.A. (“Petitioner”) appeals the trial court’s order dismissing foreclosure proceedings against Respondent Tonya R. Bass. Petitioner assigns error to the trial court’s determination that Petitioner is not the legal holder of a promissory note executed by Respondent and therefore lacks authorization to foreclose on Respondent’s property securing the note under a deed of trust. After careful review, we affirm.

I. Factual & Procedural Background Continue reading “US Bank is not the Note Holder – North Carolina: Bass vs. US Bank”

LivingLies Post: FLORIDA SUPREME COURT RIPS UP BANKS’ PLAYBOOK

LivingLies Post: FLORIDA SUPREME COURT RIPS UP BANKS’ PLAYBOOK

By Daniel Edstrom
DTC Systems, Inc.

After reading this article by Neil F. Garfield, Esq. (http://livinglies.wordpress.com/2011/12/09/florida-supreme-court-rips-up-banks-playbook/), I have an open question for lawyers and judges that I am pondering.  How can any “final” adjudication be final if the title to a property has not been fixed?  If title to a property is left in an inconsistent state, how can res judicata, a judgment or any other type of ruling be “final”?  If title to a property is left with, for example, a wild deed, a forgery or some other defect (or as seems to be typical – defects) rendering title unmarketable, would it not take a ruling by a judge to correct these issues?  If a UD judgment is “final” and a homeowner is evicted, and title is left defective (again, by way of example with a wild deed, forgery or some other similar type of defect), how do you get title cleared?

Attorneys General of California and Nevada Announce Mortgage Investigation Alliance

Attorneys General of California and Nevada Announce Mortgage Investigation Alliance

By Daniel Edstrom
DTC Systems, Inc.

Press Release December 6, 2011

Attorneys General of California and Nevada Announce Mortgage Investigation Alliance

LOS ANGELES — Attorneys General Kamala D. Harris of California and Catherine Cortez Masto of Nevada today announced that their states have entered into a joint investigation alliance designed to assist homeowners who have been harmed by misconduct and fraud in the mortgage industry.

By forging this alliance, California and Nevada will combine investigative resources, including litigation strategies, information, and evidence gathered through their respective ongoing investigations, assisting each state as it pursues independent prosecutions.

This alliance will link the offices’ civil and criminal enforcement teams, speeding along the full, fair and adequate investigation of wrongdoing in the two states, which have experienced similar foreclosure and mortgage fraud crises. Continue reading “Attorneys General of California and Nevada Announce Mortgage Investigation Alliance”

Wild Deeds, Assignments and ‘Dangerous Innovation’

Wild Deeds, Assignments and ‘Dangerous Innovation’

By Daniel Edstrom
DTC Systems, Inc.

As much as things change, they remain the same.  Wild Deeds, Strangers to Title, Nominee’s, Agents, Evidence, etc., have always been issues in real estate transactions.  Thanks to Monica Graham for finding this case.   Look at this excerpt regarding “dangerous innovation” decades before the mortgage meltdown:

In the present case, we would have to assume the position of Russ and Ethyl Green in the chain of title, that the Crestmore Company had complied with the statutory provisions relating to the use of a fictitious name, and that P. H. Wierman was a member of the firm with the authority to execute an assignment of the note made payable to that firm. Such assumptions, would indeed, constitute a “dangerous innovation.”

This excerpt regards proof of the chain of title:

[6c] For the above reasons it appears that plaintiffs failed to prove a valid assignment of the note and third trust deed to them. As assignees they stand in the same position as their assignor, the Crestmore Company, and must prove their chain of title to the note in question.

This excerpt is in regards to the burden of proof in proving an assignment:

The burden of proving an assignment falls upon the party asserting rights thereunder (Read v. Buffum, supra, 79 Cal. 77 [21 P. 555, 12 Am.St.Rep. 131]; Ford v. Bushard, 116 Cal. 273 [48 P. 119]; Bovard v. Dickenson, 131 Cal. 162 [63 P. 162]; Nakagawa v. Okamoto, 164 Cal. 718 [130 P. 707]). [8] In an action by an assignee to enforce an assigned right, the evidence must not only be sufficient to establish the fact of assignment when that fact is in issue (Quan Wye v. Chin Lin Hee, 123 Cal. 185 [55 P. 783]) but the measure of sufficiency requires that the evidence of assignment be clear and positive to protect an obligor from any further claim by the primary obligee (Gustafson v. Stockton etc. R. R. Co., 132 Cal. 619 [64 P. 995]). Continue reading “Wild Deeds, Assignments and ‘Dangerous Innovation’”

How to Get a Full Accounting in California

Edstrom_MortgageSecuritization_POSTER_17_x_22_v4_1How to Get a Full Accounting in California

By Daniel Edstrom
DTC Systems, Inc.

Here is an appeals court case showing how to plead a cause of action for an accounting.  In the securitization of residential loans, this issue is frequently discussed, but I have never seen it brought in a lawsuit.  This appeals court case is certified for publication and was filed on April 22, 2009.

Accounting

A cause of action for an accounting requires a showing that a relationship exists between the plaintiff and defendant that requires an accounting, and that some balance is due the plaintiff that can only be ascertained by an accounting.  (Brea v. McGlashan (1934) 3 Cal.App.2d 454, 460, 39 P.2d 877;  5 Witkin, Cal. Procedure (5th ed. 2008) Pleading, § 819, p. 236.)

An action for accounting is not available where the plaintiff alleges the right to recover a sum certain or a sum that can be made certain by calculation.  (St. James Church of Christ Holiness v. Superior Court (1955) 135 Cal.App.2d 352, 359, 287 P.2d 387.)   A plaintiff need not state facts that are peculiarly within the knowledge of the opposing party.  (Brea v. McGlashan, supra, 3 Cal.App.2d at p. 460, 39 P.2d 877.)

Full Ruling: http://dtc-systems.net/wp-content/uploads/2011/12/Teselle-vs-McLoughlin-C054919-CERTIFIED-FOR-PUBLICATION.pdf

Culhane vs Aurora Loan Services

Culhane vs Aurora Loan Services

By Daniel Edstrom
DTC Systems, Inc.

Note the following from this United States District Court case from the District of Massachusetts:

It is clear beyond peradventure that Culhane is substantially behind in paying her mortgage and appears unable to remediate her default.  This, however, does not render her an outlaw, subject to having her home seized by whatever bank or loan servicer may first lay claim to it.

Notice this from the case also:

 Nationwide, courts are grappling with challenges to MERS’s power to assign mortgages as well as its practice of deputizing employees of other companies to make assignments on its behalf. The present case is distinct only in that it is this Court’s first encounter with MERS and with the question whether its involvement in the origination and assignment of a mortgage loan clouds record title to the mortgaged property. The public has an interest in ensuring the liquidity of the mortgage market. Thus, even if Culhane is unable to exercise her equitable right of redemption and foreclosure of her mortgage loan is inevitable, title must pass free of cloud and not subject to challenge in any future action for summary process or to try title on the ground that the foreclosure process was conducted unlawfully. See Bevilacqua v. Rodriguez, 460 Mass. 762, 772 (2011); Bank of N.Y. v. Bailey, 460 Mass. 327, 333-34 (2011).

Order: http://dtc-systems.net/wp-content/uploads/2011/11/Culhane-vs-Aurora-Loan-Services.pdf

Office of the Comptroller Handbook: Internal Control

Office of the Comptroller Handbook: Internal Control

By Daniel Edstrom
DTC Systems, Inc.

Understanding the Cease and Desist Consent Orders begins by understanding safe and sound banking.  The foundation of safe and sound banking is effective internal controls.  This handbook discusses Internal Control for National Banks.  Consider the following handbook quote:

 Effective internal controls are the foundation of safe and sound banking. A properly designed and consistently enforced system of operational and financial internal control helps a bank’s board of directors and management safeguard the bank’s resources, produce reliable financial reports, and comply with laws and regulations. Effective internal control also reduces the possibility of significant errors and irregularities and assists in their timely detection when they do occur.

In the Cease and Desist Consent Orders issued on April 13, 2011 the Office of the Comptroller is essentially saying the following:

Ineffective internal controls are the foundation of unsafe and unsound banking. A poorly designed and inconsistently enforced system of operational and financial internal control inhibits a bank’s board of directors and management from safeguarding the bank’s resources, from producing reliable financial reports, and from complying with laws and regulations. Ineffective internal control also increases the possibility of significant errors and irregularities and assists in the failure of their detection during their occurance as well as long afterwords.

 The Comptroller’s Handbook defines Internal Control as follows:

Internal control is the systems, policies, procedures, and processes effected by the board of directors, management, and other
personnel to safeguard bank assets, limit or control risks, and achieve a bank’s objectives.

The Comptroller’s Handbook says the following about regulatory requirements:

National banks must adhere to certain regulatory requirements regarding internal control. These requirements direct banks to operate in a safe and sound manner, accurately prepare their financial statements, and comply with other banking laws and regulations. The laws and regulations that establish minimum requirements for internal control are 12 CFR 30, Safety and Soundness Standards; 12 CFR 363, Annual Independent Audits and Reporting Requirements; and 15 USC 78m, Securities Exchange Act of 1934.

12 CFR 30
12 CFR 30, Safety and Soundness Standards, establishes certain managerial and operational standards for all insured national banks, including standards for internal control. Appendix A to 12 CFR 30 states that a national bank should have internal controls that are appropriate to the size of the bank and the nature, scope, and risk of its activities, and that provide for

• An organizational structure that establishes clear lines of authority and responsibility for monitoring adherence to prescribed policies.
• Effective risk assessment.
• Timely and accurate financial, operational, and regulatory reports.
• Adequate procedures to safeguard and manage assets.
• Compliance with applicable laws and regulations.

When a national bank fails to meet these standards, the OCC may require management to submit a compliance plan to address internal control deficiencies. If the bank fails to submit a satisfactory plan, the OCC must, by order, require the bank to correct the deficiency.

This is pretty much the action that the OCC has taken in the Cease and Desist Consent Orders.  It should also be of significance to note that the actions taken in many cases under the Cease and Desist Consent Orders were directed to some of the largest national banks under complex financial engineering transactions.

Download the Comptroller’s Handbook on Internal Control: http://dtc-systems.net/wp-content/uploads/2011/11/intcntrl.pdf