Every now and again, a potentially significant story manages to slip through the cracks, barely noticed by anyone. A recent Dow Jones article by Jilian Mincer — "Mtge Lawsuits Could Bail Out Some Borrowers" — is just such an article. The only reason I even knew about it was because I spoke with the reporter and was quoted in it.

It is a fascinating tale that I suspect won’t be ignored for long. For those few people familiar with the Federal Truth-in-Lending Act (TILA), this won’t be much of a surprise. To everyone else, read on.

What happens if a lender fails to comply with the TILA rules? The boList Postsrrowers are allowed to RESCIND THE LOANS AND VOID THE MORTGAGES ON THEIR HOMES. The mortgage lender is then just another unsecured creditor,
who must get in line behind everyone else who may have filed a lien on
the property. Who ever files first (Credit card, auto finance, doctors,
etc.) has first priority.

That makes the mortgage loan itself unsecured — and worth a lot less — due to the increased risk of loss of collateral:

"Some
consumers burdened by escalating subprime mortgage payments are finding
a way out. A growing number are suing lenders over inaccurate
disclosure papers, and if they win they get to rescind the loans.

While that’s good news for individuals, it’s a potential problem for
investors exposed to subprime mortgages. These investors, already
buffeted by the subprime mortgage meltdown, are facing a new risk – the
mortgages supporting some of their investments may not be enforceable
because of violations of state and federal consumer protection laws.

It’s not clear yet how widespread or successful these lawsuits may
become. "Depending on how widespread, this could be a minor bump in the
road or this could be a very significant factor," says Barry Ritholtz,
chief market strategist at Ritholtz Research & Analytics.

The subprime market has been known for its lax standards in
documentation and the proliferation of these loans in recent years is
now fueling significantly more complaints. The subprime share of first
mortgages rose to 13.4% in the first quarter of 2007 from 10.9% in the
first quarter of 2004."

Let me put on my lawyer hat for a moment: The Truth-in-Lending Act requires "clear and
conspicuous" disclosure to borrowers
of the key provisions of their mortgages. This includes such details as the eventually reset interest rate, specific loan terms, and the total dollar amount the mortgage will cost over time:

§ 129.  Requirements for certain mortgages

(1)  SPECIFIC DISCLOSURES.–In addition to other disclosures required under this title, for each mortgage referred to in section 103(aa), the creditor shall provide the following disclosures in conspicuous type size:
(2)  ANNUAL PERCENTAGE RATE.–In addition to the disclosures required under paragraph (1), the creditor shall disclose

(A)  in the case of a credit transaction with a fixed rate of interest, the annual percentage rate and the amount of the regular monthly payment; or

(B)  in the case of any other credit transaction, the annual percentage rate of the loan, the amount of the regular monthly payment, a statement that the interest rate and monthly payment may increase, and the amount of the maximum monthly payment, based on the maximum interest rate allowed pursuant to section 1204 of the Competitive Equality Banking Act of 1987.
(emphasis added)

This seems to be where many of the subprime 2/28 ARMs ran afoul: They failed to meet the disclosure laws regarding actual interest amounts and payments.

Who has gotten tagged with these cases so far? Subprime lender NovaStar Financial Inc. (NFI) in Kansas City settled a class action suit for $5.1 million. And, consumers in Wisconsin recently won a class-action TILA suit (its under appeal).

Between 1998 and 2006, approximately 2.2 million (nominal) home owners with subprime loans are expected to lose their homes, according to the Center for Responsible Lending. The consumers in this group who a) could not afford those loans and b) did not receive the proper disclosures are "talking with lawyers in an effort to prevent foreclosures."

~~~

Anyone who has worked in a corporate environment has used or heard the phrase "Send it to Legal," or "What did Legal say about that?" Of course, "Legal" being the internal corporate legal department.   

Didn’t the legal departments of the mortgage underwriters prepare these loan forms?  Aren’t these standardized? WTF did the various legal departments involved actually do, other than go to lunch and wear ugly ties ?

Astounding!

And, here’s the real rub:    This kinda makes you wonder what sort of due diligence the secondary
market actually did on these basic non-compliant loan errors in the
sub-prime market. How about the CDO banking underwriters — didn’t their Legal review these docs for compliance with existing laws prior to purchasing trillions of dollars worth of the stuff? Was their fraud involvd, or did these guys just miss it?

This is basic stuff, and its amazing that in the headlong rush to write these garbage loans, no one caught very basic, banking 101 type rule.    

It just shows how little oversight by the regulators there was in this space. Hard to imagine, but the Central Bankers either never reviewed these loan documents, or never caught these basic disclosure errors.

And yes, I place some of the blame on the Greenspan Federal Reserve — they were the regulatory authority in charge of bank mortgage lending when these junk mortgages were written . . .

>

>

Source:
Mtge Lawsuits Could Bail Out Some Borrowers
Jilian Mincer
Dow Jones Newswires Column, 7/16/2007 7:31 AM
Newswire only

CONSUMER CREDIT PROTECTION ACT
15 U.S.C. 1601 note]
May 29, 1968 (Pub. L. No. 90–321; 82 Stat. 146)
http://www.fdic.gov/regulations/laws/rules/6500-200.html

Category: Credit, Federal Reserve, Legal, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “Truth-in-Lending Disclosure Failure Leads to Mortgage becoming “UnSecured””

  1. Greg says:

    And many of the securitization transaction documents – particularly for recent deals – may allow the purchasers of the paper to “put” mortgages like this back to the originators. If they haven’t gone bankrupt.

    And even those where the documents do not allow the purchasers to put back to the originators will probably result in lawsuits.

    As Barry noted, this is a big deal – and shows how far out of hand things got. Not getting the truth-in-lending disclosures right – and all of the participants not picking up on these failures at the point of securitization – is a major failure in the mortgage process given the severity of the consequences.

  2. peter from oz says:

    boys don’t get excited
    same thing over here
    the normal mortgage borrower can’t pay his mortgage so how’s he going to pay his lawyer
    class actions for paupers against banks rarely get going let alone to first base
    rgds pcm

  3. Justin L Tindall says:

    Berry, this whole circus act, is making me think that the downward spiral on the economy after the crash of 2000, and the subsequent 9/11 tradgedy, had the FED thinking: cut, cut, cut, and then “ground out” the problem in the housing sector, and then once all the foreclosers, delinquencies, etc., are over, good hard assets will still be available to ultimately support an economy and a people going forward. Perhaps this is too simplistic?

  4. semper fubar says:

    Not to worry – the same politicians who brought you the “Credit Card Company Welfare Act”- aka the bankuptcy bill — (are you listening Joe Biden?) will get to work as soon as they come back from vacation in September to pass new laws retroactively rescinding the T-I-L Act, and the investors will again be saved.

  5. Scott Frew says:

    So, with her homes unencumbered by debt, the beleaguered consumer can now take out large home equity loans. MEW, like Bird, lives. Buy consumer discretionary. The ecoonomy’s saved!

  6. blam says:

    Please elaborate on Biden’s role in rewriting the bancruptcy laws.

    Anyone involved in foisting that garbage on America is not fit to be president!

  7. SPECTRE of Deflation says:

    Barry none of this matters. This statement by Lacker makes clear they will accept pure crap at the window. They are calling these loans at this point, but who in the Hell in their right mind would touch the toxic paper except the FED? Marked to Goldilocks is alive and well. It’s called monetizing the debt at some point in the future.

    “Lacker told risk managers yesterday that the Fed’s district banks would even accept boat loans as collateral. It’s up to the banks to establish a value for the assets as they make the loan, he said.”

  8. Bengal says:

    Barry, I’m going to run, not walk, and check my loan documentation (and lawyer’s phone number/e-mail address) right away!

    Notwithstanding the letter of the Truth-in-Lending law and the remedies perhaps available to borrowers when the lender fails to comply with disclosure requirements, it would be the ultimate irony if sub-slime borrowers could recover under these provisions when so many of them egregiously misrepresented income, assets, intent to be an owner-occupant, and just about every other element in the borrowing process. Truth-in-Lending? Hah! But, then again, I’m not a lawyer (thank God)!

  9. SPECTRE of Deflation says:

    Second Largest Private Mortgage Lender Goes Poof. Looks contained to me. Maybe next the FED can take TV’s, camcorders, sound systems and other goodies we all just had to have.

    First Magnus, Mortgage Lender, Files for Bankruptcy Protection

    By Steven Church

    Aug. 21 (Bloomberg) — First Magnus Financial Corp., the second-largest privately held U.S. mortgage company, filed for bankruptcy, less than one week after it shut down its lending operations.

    First Magnus had $942.1 million in assets and $812.5 million in debt as of May 31, according to its Chapter 11 bankruptcy petition filed today in federal bankruptcy court in Tucson, Arizona.

    The company said Aug. 16 that it shut down its lending operation after investors quit buying the company’s loans. Today’s court filing makes it the 14th lender since December to seek bankruptcy protection and one of more than 90 to either shut down or seek a buyer.

    First Magnus was the 16th-largest U.S. home lender overall during the first half of this year, according to trade newsletter Inside Mortgage Finance. Katie Myers, a spokeswoman for the Tucson-based company, didn’t return a call seeking comment.

    The case is In re First Magnus Financial Corp. 07-01578, U.S. Bankruptcy Court, District of Arizona (Tucson).

    To contact the reporter on this story: Steven Church in Wilmington, Delaware, at schurch3@bloomberg.net .

    Last Updated: August 21, 2007 15:18 EDT

  10. SPECTRE of Deflation says:

    “It just shows how little oversight by the regulators there was in this space. Hard to imagine, but the Central Bankers either never reviewed these loan documents, or never caught these basic disclosure errors.”

    “And yes, I place some of the blame on the Greenspan Federal Reserve — they were the regulatory authority in charge of bank mortgage lending when these junk mortgages were written . . .”

    Greenspan was too busy hawking the damn exotic loans to be concerned with regulatory oversight. The next bubble had to be blown…

  11. Dan says:

    Shouldn’t some of the blame fall on the consumer that lied about how much money they make? The banks deserve a lot of the blame, but so does the borrower. If they had told the bank the truth in the beginning, half of these loans wouldn’t exist today.

    I purchased my first home when I was 24. My first loan was a 30 year fixed loan and my refi was a 5/1 ARM. All of the terms and conditions were clearly laid out for me (I know because I initialed next to each section). If there was something in the loan that I didn’t understand, it is up to me to ask for clarification because I am the one signing for the loan.

    Dan

    ~~~

    BR: Remember, the consumer of these loans is not very sophisticated — the mortgage broker says “Its a no income, no doc loan, so just put down anything.” And the consumer complies . . .

  12. David Merkel says:

    If TILA claims are successful, there would probably be a breach of the reps & warranties made by the originator. I think there is a time limit on the reps and warranties though, and I’m not sure how long it is.

    If a securitized loan has to be taken by the originator, the AAA part of the deal will prepay by that amount. Losses will be borne first by the overcollateralization account, and then the tranches, starting with the most junior, and then moving in order of increasing seniority.

    If a bank goes insolvent as a result of this, any claims against the bank by the securitization trust would be general claims against the bank.

    Very interesting, Barry. Thanks for posting this. It’s just another reason why in securitization, it is better to be a AAA holder, or an equity holder. They have all of the rights — the AAAs when things are bad, and the equity when things are good to modestly bad.

  13. Ross says:

    If I remember correctly, under Federal contract law, If it aint in the closing doc’s it don’t exist. I ran afoul of this during the RTC witch hunts in the late 1980′s. An obscure ruling in the 1940′s allowed the Gov. to ignore handshakes, side agreements and in some cases even amended closing documents. Even a resulution of the board of an S%L expost facto of a closing could be ignored.
    My point is that the law is what Government says it is. The point above about affording $300/hour lawyers to bail out of a residential mtg is a good one.

  14. zero529 says:

    The lawyers are drooling over this — sue the lender for TILA failures! countersue the borrowers for lying on docs!

    My gut sense is that many of these borrowers didn’t understand the loan terms even though they were laid out in front of them. And how do you prove that something (i.e., disclosure) *didn’t* happen? Proving a negative is always tricky, unless the docs themselves plainly omit any mention of the reset.

  15. SPECTRE of Deflation says:

    From Ambrose Evans-Pritchard of the Telegraph. Found this at “The Mess That Greenspan Made” which is so apropo:

    We can presume that Ben Bernanke did not undertake this volte face lightly, given his determination to end the Greenspan practice of reflexive bail-outs – and to shake off his own image as an easy money man. I suspect Mr Bernanke now fears the economy is hurtling into a brick wall.

    America is sliding into the worst housing slump since the Depression.

    The bond markets know the fuse is already lit on mass default, which is why $2,000bn of US sub-prime and Alt-A debt packaged as securities is being marked down so violently on books – German, French and Dutch books as it turns out.

    The hit to the real economy will follow soon. Americans now face wealth deflation on both the housing and equity markets.

    In the end, the world’s central banks can always reflate the markets – if they are willing to tolerate the side-effects. The 1930s liquidity trap has been overtaken by new methods of stimulus, as Mr Bernanke made all too clear in his “helicopter” speech in November 2002. “The US government has a technology, called a printing press, that allows it to produce as many US dollars as it wishes at essentially no cost,” he said.

    The Fed can “expand the menu of assets that it buys”, he said, citing agency mortgage debt, a gamut of bonds and even use of “commercial paper” as collateral. The process began gingerly last week. The markets may come to know real fear before it is finished.
    And now comes this one today on who should be blamed for the mess:

    The witch hunt has begun. French president Nicolas Sarkozy has vowed to hunt down the “speculators”. Germany’s Angela Merkel is eyeing laws to curtail hedge funds.Brussels has launched a probe of the rating agencies, suspected of sticking “AAA” and “AA” grades on sub-prime debt for venal motives. The US Congress is orchestrating a show trial of “predatory lenders”.

    The blame-game was ever thus. Wall Street bankers were hounded after the 1929 crash: some went to prison. But if you track down the root cause of this credit bubble – now popped – the “blame” lies with Asian, European and Anglo Saxon central banks.

    They created this mess, if that is what we now face. It was they – in effect governments – who intervened in countless complex ways to push down the price of global credit to levels that warped behaviour, as the Bank for International Settlements (BIS) has repeatedly noted. By setting the price of money too low, they encouraged debt and punished savings.

    The central banks have said their task is to fight inflation, not to police asset prices. Critics retort that the US asset bubble in the 1920s and Japan’s bubble in the 1980s both occurred at a time of low inflation. Belatedly the Bank of Japan, the ECB, the Swiss, the Scandies and the Bank of England are questioning the wisdom of ignoring asset prices, deeming it wise to “lean into the wind” to slow excesses. But it is very late in the day. The credit bubble is already with us.

  16. SPECTRE of Deflation says:

    From Bloomberg. This is what we are left with. Start the monetization. It looks as if the Regulators all decided to take a holiday that lasted for years:

    Wells Fargo Gorges on Mark-to-Make-Believe Gains: Jonathan Weil
    2007-08-22 00:02 (New York)

    Commentary by Jonathan Weil
    Aug. 22 (Bloomberg) — There’s the kind of earnings
    investors can take to the bank. And then there’s the kind the
    bank can show to investors.
    Word to Wells Fargo & Co. investors: Beware the second
    kind.
    Last quarter Wells Fargo reported record net income of
    $2.28 billion, up 9 percent from a year earlier. Read the
    footnotes to its latest quarterly report, though, and you will
    see a new term in accounting lingo called “Level 3” gains.
    Without these, the financial-services company’s earnings would
    have declined.
    So what are Level 3 gains? Pretty much whatever companies
    want them to be.
    You can thank the Financial Accounting Standards Board for
    this. The board last September approved a new, three-level
    hierarchy for measuring “fair values” of assets and
    liabilities, under a pronouncement called FASB Statement No.
    157, which Wells Fargo adopted in January.
    Level 1 means the values come from quoted prices in active
    markets. The balance-sheet changes then pass through the income
    statement each quarter as gains or losses. Call this mark-to-
    market.
    Level 2 values are measured using “observable inputs,”
    such as recent transaction prices for similar items, where
    market quotes aren’t available. Call this mark-to-model.
    Then there’s Level 3. Under Statement 157, this means fair
    value is measured using “unobservable inputs.” While companies
    can’t actually see the changes in the fair values of their
    assets and liabilities, they’re allowed to book them through
    earnings anyway, based on their own subjective assumptions. Call
    this mark-to-make-believe.

    Antennae Up

    “If you see a big chunk of earnings coming from
    revaluations involving Level 3 inputs, your antennae should go
    up,” says Jack Ciesielski, publisher of the Analyst’s
    Accounting Observer research service in Baltimore. “It’s akin
    to voodoo.”
    For San Francisco-based Wells Fargo, whose stock is up 5
    percent this year at $37.37, last quarter was a veritable mark-
    to-make-believe feast.
    About $1.21 billion, or 35 percent, of its $3.44 billion in
    pretax income came from Level 3 net gains on the $18.73 billion
    portfolio of residential mortgage-servicing rights that Wells
    Fargo marks at fair value. These assets, known as MSRs, consist
    of rights to collect fees from third parties in exchange for
    keeping mortgages current, by doing things like collecting and
    forwarding monthly payments.
    Wells Fargo’s July 17 earnings release didn’t mention Level
    3 items. This isn’t how the second-largest U.S. home lender
    wants investors to parse its earnings either.

    Hurting Earnings

    Instead it stresses a metric called “market-related
    valuation changes to MSRs, net of hedge results,” which was
    minus $225 million last quarter. Spun this way, it looks like
    changes in the servicing rights’ values actually hurt earnings.
    To get that figure, the company first broke the $1.21
    billion of net gains on MSRs into two parts.
    Part one was $2.01 billion of gains “due to changes in
    valuation model inputs or assumptions.” Part two was $808
    million of fair-value declines from changes related to the
    servicing rights’ expected cash flows over time. (All figures
    are rounded.)
    Next, Wells Fargo took the first part — the $2.01 billion
    in gains — and netted it against $2.24 billion in fair-value
    losses on certain “free-standing derivatives.” The company
    says it uses these derivatives as “economic hedges” against
    changes in MSR values, although they don’t qualify for hedge
    accounting under the accounting board’s rules.

    The Rub

    Here’s the rub: The footnotes show the vast majority of the
    $2.24 billion in derivative losses were Level 1 or Level 2,
    while the $2.01 billion in MSR gains were all Level 3.
    In other words, it’s a safe bet the losses were real, while
    the gains had all the substance of a prayer. Indeed, Wells Fargo
    said in its Aug. 6 quarterly report that “the valuation of MSRs
    can be highly subjective and involve complex judgments by
    management about matters that are inherently unpredictable.”
    Moreover, to get to minus $225 million for “market-related
    valuation changes to MSRs, net of hedge results,” Wells Fargo
    excluded the other $808 million in MSR losses, meaning these
    fair-value changes weren’t hedged at all.
    In an e-mail, Wells Fargo spokeswoman Janis Smith Appleton
    said “it would be inaccurate to characterize one component of
    our servicing revenue for the quarter in relation to our total
    results.” She said that’s “because it would ignore the
    effect” rising interest rates had “on both the increase in
    fair value of our residential MSRs as well as the corresponding
    net derivative losses associated with the economic hedges of our
    MSRs.”

    Real Stretch

    Inaccurate? No. The real stretch is calling these
    derivatives hedges.
    Nobody forced Wells Fargo to start running quarterly fair-
    value changes for MSRs through its income statement. The
    accounting standard that let it do so, called Statement 156,
    gave it a choice.
    SunTrust Banks Inc., by comparison, elected not to. Why?
    “In my mind there is no effective hedging strategy out there
    that captures all those risks that would move in offsetting
    directions to MSR,” says Tom Panther, SunTrust’s chief
    accounting officer. So, SunTrust waits until the servicing
    rights are sold before recognizing any pent-up gains.
    MSR values normally rise when interest rates do, because
    fewer customers refinance and prepay their mortgages. At some
    point if rates rise too high, though, delinquencies on
    adjustable-rate mortgages could soar, as customers’ rates reset,
    pushing MSR values down.
    With mortgage markets now crashing, SunTrust looks like it
    made the more prudent choice. Yet in the lunch buffet of
    generally accepted accounting principles, both companies’
    approaches are permitted.
    Someday, Wells Fargo investors may regret this.

  17. Anonymous says:

    Two words: PREDATORY BORROWING!

  18. L'Emmerdeur says:

    My thoughts until now have been “Yeah, good luck sticking it to the lender/buyer, little guy”. Perhaps the morons in legal will find jobs at law firms involved in these cases – schwing!

  19. michael schumacher says:

    As Hank Paulsen said:

    “we have a problem with a few bad loans”

    nevermind that your industry packaged them up and gift wrapped them to the rest of the world under the guise of “investing” in american (i.e. price ALWAYS goes up) real estate.

    How this man has any credibility left is beyond me. thank god that he and his fiscally irresponsible policies will be out on his ass come next year….that is if we get a chance to vote. I have a hard time thinking that the neo-cons. will just hand over anything to hillary/obama in a fairly contested election. That is if we actually get to vote. I still think Rudy G. will be involved somehow..but that’s a different discussion.

    Now back to your regularly scheduled bullshit “rally”.

    Ciao
    MS

  20. mhm says:

    Level 3 accounting huh… I was going to make a witty comment but actually started to worry….

  21. SPECTRE of Deflation says:

    More containment kids. Getting pretty close to 100,000 in reductions in the financial market jobs, but not to worry because it’s contained:

    Accredited to Lay Off 1,600; Halts Lending
    August 22, 2007

    Accredited Home Lenders Holding Co. said this morning that it will lay off 1,600 of its 2,600 employees and that it has halted originating new loans amid what it called “ongoing turmoil in the non-prime mortgage industry.”

    The San Diego-based lender said it would close “substantially all” of its retail lending business — 60 branch locations and 5 retail support locations; that it would shutter five of its ten wholesale divisions; and that it would “substantially” reduce staffing at its Inzura Settlement Services division; and that it would cut roughly half of the company’s headquarter’s based staff.

    The company’s servicing platform is not impacted by the downsizing effort, the company said in its statement:

    James A. Konrath, chairman and chief executive officer, commented, “These difficult decisions were made out of necessity in light of the continued and widely publicized turbulence in the mortgage and financial markets, but with a heavy heart. Many of the people who are affected by these decisions have been productive, dedicated, and loyal colleagues for many years. We will miss them and the enthusiasm and creativity that they brought to their jobs every day at Accredited.”

    The Company reported that neither its Canadian operations nor its servicing platform for its loan portfolio of $8.4 billion as of June 30, 2007 will be affected by the restructuring. Mr. Konrath added, “Accredited’s delinquency and loss numbers have historically been among the best in the industry. Even though our servicing ratings have been downgraded over liquidity concerns in recent months, we intend to maintain the quality of our servicing operations and expect to continue providing the highest level of loan servicing for our bond investors.”

  22. techy2468 says:

    so level 3 by Wells Fargo is a bad thing for investors right??

    how come i dont see a correction in wells fargo share price? is this a old news?
    or we are the first ones to know about it?
    or the market does not care, today is wednesday and it has to go up?
    or market knows that FED has promised to cut the rate anytime…..and hence there is nowhere but up to go

  23. ronin says:

    here’s the real rub: This kinda makes you wonder what sort of due diligence the secondary market actually did on these basic non-compliant loan errors in the sub-prime market.

    My guess is this is a feature, not a bug: There’s no money in spoiling the party. Just as stock analysts were corrupted by the investment banking side, or accounting firms by big bucks made by consulting for the same firms they were auditing.
    Probably more lawsuits in the works.

    “Lacker told risk managers yesterday that the Fed’s district banks would even accept boat loans as collateral. It’s up to the banks to establish a value for the assets as they make the loan, he said.”

    So this is essentially a bailout by the Fed. Socialize the risk, again. So if the Fed is essentially the buyer of last resort for this toxic waste, shouldn’t they have some regulatory power over this market? I know, don’t laugh.

  24. Ken says:

    TILA is the best predatory lending law, but unfortuantely, it has a one year statute of limitations. All of the loans that come across my desk so far have been beyond that point.

    So this is not really the law that is going to get the mortgage pool guys.

    Mortgages are generally a negotiable instrument so defenses a borrower has against the lender may not be used against a “holder in due course.” This means that a s soon as a mortgage goes into a trust, you basically have 1 year from origination to bring a TILA claim for recission or the borrowers’ only remedy is against the lender (see the implode-o-meter). The Wall Street system of mortgage pools is very good at cutting off legal risk.

    There are a couple of other ways to win against a mortgage pool. If the loan was in default when it was “negotiated” the new owner is not a “holder in due course” and thus claims against the lender can be used against the new owner. This usually happens when a loan is transferred after the original sale to the mortgage pool.

    The other way is to attack the servicer for RESPA violations (fee jamming, failing to properly credit, forced placed insurance, etc.).

    But getting back to TILA, it’s really not the killer law that it sounds like because of the 1 year statute.

    Cheers,

    Ken

  25. SPECTRE of Deflation says:

    More positive news, and it’s probably why we are up today. END SARCASM!

    WASHINGTON -(Dow Jones)- The number of troubled assets among federally regulated thrifts rose rose 49% in the second quarter from 12 months before to the highest level since the savings and loan crisis, the Office of Thrift Supervision reported Tuesday.

    The agency also reported that the number of “problem thrifts,” or companies rated poorly by regulatory standards, had risen to 10, up from just 4 in the second quarter of 2006.

    Still, the regulator said that although the 836 thrifts it regulates are continuing to feel stress from housing and liquidity markets, the overall health of the companies remains strong, based on earnings and capital.

    Thrifts are federally regulated banks that originate one out of every four mortgages. The companies largely originate prime or jumbo loans, so their stressed loan portfolios suggest that more loan types – not just subprime mortgages – are under pressure.

    The thrift industry had $14.2 billion in troubled loans, which are either noncurrent loans or repossessed assets, the OTS said. That’s up from $9.5 billion in the second quarter of 2006. This is the highest level of troubled assets since 1993, though as a percentage of total assets its only the highest level since 1997. Noncurrent loans include mortgage delinquencies, which have grown precipitously as the adjustable-rate mortgages that were very popular during the recent housing boom reset into much higher monthly commitments.

    “This is what is keeping us as regulators up at night,” James Caton, director of financial monitoring and analysis, said at a press briefing to discuss the data.

  26. michael schumacher says:

    >>so level 3 by Wells Fargo is a bad thing for investors right??>>

    Just because it has not had a material effect on share price does not make it ok to continually mark assets to whatever you decide is it’s valuation. What is most distressing is that they (wells) feel the need to use smoke and mirrors to report it’s “earnings”……instead of an upfront approach that removes any and all doubt.

    But that’s not how the financials are working as of late. Are we going to expect almost a month of “rally caused by fed rate expectations” or”insert bullshit m&a story here”…..

    Utter rubbish….

    Ciao
    MS

  27. SPECTRE of Deflation says:

    so level 3 by Wells Fargo is a bad thing for investors right??

    how come i dont see a correction in wells fargo share price? is this a old news?
    or we are the first ones to know about it?
    or the market does not care, today is wednesday and it has to go up?
    or market knows that FED has promised to cut the rate anytime…..and hence there is nowhere but up to go

    Posted by: techy2468 | Aug 22, 2007 10:43:09 AM

    One little problem with your up…up…up scenario. The Dollar will tank, and inflation, honestly reported or not, will sky. As to the question of Wells Fargo, it’s not going to leave a mark until they are forced to mark to market from mark to Goldilocks. Then the shit will hit the fan. If the FED is determined to monetize, I sure as shit don’t want to be long the Dollar.

  28. tekel says:

    So, does TILA mean that I can just bail on my mortgage payments and keep the house? Because that would be great. And honestly, I don’t give a shit about the state of the economy or whether the banks collapse if it means I don’t have to pay back my loan.

    Oh, wait, this only matters if I’m already losing my house. So deadbeats get to screw the moneylenders… yeah, that’s what this country needs, more financial rewards for deadbeats.

  29. Norman says:

    I’ve read a few loan agreements from major banks for friends and they were very obscure.

    First, they did not clearly explain what negative amortization was. People did not know that the difference between the begining interest rate and the real rate was added to their mortgage.

    Secondly, when the re-set rate was mentioned they used the most recent five years which were massively low by historical records thus giving borrowers a false sense of security about the future.

    The mortgage companies were deceitful and they did not lend ‘truthfully’.

  30. Mooser says:

    predatory borrowing

    Now, that’s funny!

  31. VJ says:

    Justin,

    …this whole circus act, is making me think that the downward spiral on the economy after the crash of 2000

    What “crash of 2000” ???
    .

  32. VJ says:

    SPECTRE,

    Second Largest Private Mortgage Lender Goes Poof

    Accredited to Lay Off 1,600; Halts Lending

    They’re droppin’ like flies.
    .

  33. Eclectic says:

    I’ve got your truth in lending right here, Big Boy:

    Media has all but soothed the savage beast… This little lickie-qwiddity kuh-wissis has just about shot its wad.

    The way I can tell is that I’m bored by it all now. When I’m bored, it’s over.

    Public never knew it… never cared… The big league has staved off mark-to-market, which might otherwise have frozen commercial paper and given you a real example of a liquidity crisis, and that was Bernanke’s greatest contribution, to-date, in nipping that in the bud… and I think we should be grateful that he did, if we’re logical and rational o-b-j-e-c-t-i-v-o-l-o-g-i-s-t-s.

    The next one’ll have to be of a magnitude much higher to get the public’s attention, because Media has now marched up the learning curve they needed to deal with the first one and make it easier to deal with the next one. I certainly hope that behind the scenes being played out that derivatives players are reducing the potential volatility of the next crisis.

    Somehow I kinda doubt it though.

    I’m not saying by any means there won’t be another crisis (I expect so), but just that you’ve already had your traditional October surprise… just a tad early this year.

    Surprise!

  34. SPECTRE of Deflation says:

    VJ, check out this news. From Interest Rate Roundup:

    Q2 banking stats out … and they don’t look good

    The FDIC just released data on the banking industry for Q2 2007. Suffice it to say the numbers don’t look good. You can read the full “Quarterly Banking Profile” document at this PDF link. But let me excerpt some of the main points, highlight a few things in bold:

    EXCERPTS:
    * There were 824 institutions reporting net losses for the quarter, compared to 600 unprofitable institutions a year earlier. This is the largest year-over-year increase in unprofitable institutions since the third quarter of 1996. The increase in unprofitable institutions was greatest among institutions with less than $1 billion in assets, and among institutions with high levels of residential real estate and commercial loan exposures. The proportion of unprofitable institutions — 9.6 percent of all insured institutions — was the highest level for a second quarter since 1991.

    * Insured institutions added $11.4 billion in provisions for loan losses to their reserves during the second quarter, the largest quarterly loss provision for the industry since the fourth quarter of 2002. This was $4.9 billion (75.3 percent) more than they set aside in the second quarter of 2006.

    * Net charge-offs totaled $9.2 billion in the second quarter, the highest quarterly total since the fourth quarter of 2005, and $3.1 billion (51.2 percent) more than in the second quarter of 2006. The loan categories with the largest increases in net charge-offs included consumer loans other than credit cards (up $757 million, or 60.9 percent), commercial and industrial (C&I) loans (up $577 million, or 71.4 percent), residential mortgage loans (up $422 million, or 144.3 percent), and credit card loans (up $393 million, or 12.1 percent). All of the major loan categories posted both increased net charge-offs and higher net charge-off rates.

    * The amount of loans and leases that were noncurrent (loans 90 days or more past due or in nonaccrual status) grew by $6.4 billion (10.6 percent) during the quarter. This is the largest quarterly increase in noncurrent loans since the fourth quarter of 1990, and marks the fifth consecutive quarter that the industry’s inventory of noncurrent loans has grown. Almost half of the increase (48.1 percent) consisted of residential mortgage loans. Noncurrent mortgages increased by $3.1 billion (12.6 percent) during the quarter. Real estate construction and development loans accounted for more than a third (34.2 percent) of the increase in noncurrent loans. Noncurrent construction loans increased by $2.2 billion (39.5 percent) during the quarter. The amount of home equity lines of credit that were noncurrent increased by $407 million (16.6 percent) during the quarter. The industry’s noncurrent loan rate, which was at an alltime low of 0.70 percent at the end of the second quarter of 2006, rose from 0.83 percent to 0.90 percent during the second quarter. This is the highest noncurrent rate for the industry in three years.

    * Banks and thrifts grew their loss reserves by $2.6 billion (3.2 percent) during the quarter, as loss provisions of $11.4 billion surpassed net charge-offs of $9.2 billion. The $2.6-billion rise in loss reserves was the largest quarterly increase since the first quarter of 2002, but it barely kept pace with growth in the industry’s loans and leases. The ratio of reserves to total loans increased from 1.08 percent to 1.09 percent during the quarter, but remains near the 32-year low of 1.07 percent reached at the end of 2006. For the fifth quarter in a row, reserves failed to keep pace with the increase in noncurrent loans. As a result, the industry’s “coverage ratio” of reserves to noncurrent loans fell from $1.30 in reserves for every $1.00 of noncurrent loans to $1.21 during the quarter. This is the lowest level for the coverage ratio since the third quarter of 2002. Reserves increased at 60 percent of institutions during the quarter.

  35. DavidB says:

    They created this mess, if that is what we now face. It was they – in effect governments – who intervened in countless complex ways to push down the price of global credit to levels that warped behaviour, as the Bank for International Settlements (BIS) has repeatedly noted. By setting the price of money too low, they encouraged debt and punished savings.

    Isn’t that an old magician’s trick? Have the audience look one way while the real action is taking place somewhere else.

    How is it the government can blame these companies for responding to policy when they were the ones who were setting policy in the first place? That is as ridiculous as tobacco lawsuits.

    The one who should be lynched is that crook Greenspan!

  36. SPECTRE of Deflation says:

    BOOYAH!! Tell me what to buy Cramer. LOL!

    Public pensions exposed to losses in hedge funds
    Dow Jones Newswires
    August 22, 2007

    NEW YORK – Recent market turmoil is likely to test the mettle of public pensions invested in hedge funds.

    Craving returns that are higher than plain-vanilla stocks and bonds, public pensions poured billions of dollars into hedge funds at a time of low volatility and solid returns. This month, though, some hedge funds have suffered double-digit percentage losses, which could sting pensions that recently have embraced this asset class.

    In July, before the market upheaval took hold of a widespread array of hedge funds, California’s and New Jersey’s massive pension funds endured mild losses in their hedge-fund investments for the month. And while the California Public Employees’ Retirement System and other well-heeled investors are no strangers to difficult markets, this will be the first time many pensions have had to navigate broad turbulence in their hedge-fund portfolios.

    “Frankly, we haven’t had much of an opportunity to test it until now,” said Robert Gentzel, spokesman for Pennsylvania’s State Employees’ Retirement System, of the pension’s $8.5 billion hedge-fund portfolio.

    Done right, hedge funds should help pensions mitigate their losses when markets sour. Hedge funds aim to profit from downturns by investing in an array of assets and tools, such as currencies or derivatives.

    But hedge-fund declines also can be more rapid and severe than declines in straight stock or bond portfolios, because of their heavy reliance on borrowed money to make trades.

    At the start of August, for example, a wave of losses hit funds that use computer models to pick which stocks and other securities will rise and fall. The damage from this strategy was by no means limited to hedge funds, but their losses were far worse. Some hedge funds had losses in the double digits in less than two weeks because of their leveraged positions.

    How pensions’ investments in hedge funds hold up when the dust settles will help determine how they manage these tricky portfolios going forward, industry watchers say.

    So far, public pensions appear to have lost minuscule amounts in their hedge-fund portfolios in July. Calpers, the nation’s largest public pension, lost 0.3 percent. New Jersey’s pension lost roughly $10 million in its $2.4 billion hedge fund portfolio last month, compared with $900 million in its $31.6 billion domestic stock portfolio. The Pennsylvania pension saw gains of 0.5 percent in its hedge-fund portfolio.

    But the damage to funds in August is likely to be worse. The August performance numbers aren’t yet available for most of the funds, but Hedge Fund Research Inc.’s HFRX Global Hedge Fund index was down 5 percent for the month as of Friday, bringing the index down less than 1 percent for the year.

    To be sure, hedge funds have been instrumental in propelling pension returns forward in recent years, and that will be a matter for consideration.

    Just last month, Calpers trumpeted its best annual performance in a decade and said it was fully funded, with $247.7 billion in assets at the end of June. The month before, it announced plans to double its investments in hedge funds, to $10 billion, following five years of strong performances.

    By mid-August, however, the fund was dealing with a different investment environment, as stock and bond markets endured a beating. As of Aug. 13, just six weeks into Calpers’ 2008 fiscal year, its assets had declined by 1.3 percent, or $3.3 billion, since June 30, according to a report to the board by Chief Investment Officer Russell Read.

    In the report, Read said the recent turmoil was creating investment opportunities that would lead to higher results in the future. But he also warned that “we are virtually certain that this year’s returns will not be as strong as last year’s.”

  37. r4d20 says:

    If they had told the bank the truth in the beginning, half of these loans wouldn’t exist today.

    What kind of behavior do you expect from bad credit risks?

    The most common cause of bad credit is people living at the edge of their means. While this is going to include honest, hardworking people who just dont earn much it is ALSO going to include a lot of people who have poor economic self-control and habitually over-spend without saving so they are unprepared for unexpected costs which leave them unable to make payments. Banks KNOW this but they went ahead because, at the time, it looked profitable – in the aggregate – to lower the bar for loans.

    So long as they made more money off the good customers than they lost on the bad ones, they were willing to give loans to people they KNEW, or should have known, were either not completely honest, self-disciplined, etc.

    Of course the situation changed and a lot of people stopped being able to keep up with their payments and NOW the loan industry is bitching like a bunch of degenerate gamblers coming off a hot streak.

  38. SPECTRE of Deflation says:

    SPECTRE,

    “Second Largest Private Mortgage Lender Goes Poof”

    “Accredited to Lay Off 1,600; Halts Lending”

    They’re droppin’ like flies.
    .

    Posted by: VJ | Aug 22, 2007 1:25:17 PM

    Lehman closing down it’s Subprime Unit. The beat does indeed go on:

    Lehman Brothers Holdings Inc., the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to close its subprime-lending unit and said 1,200 employees will lose their jobs.

  39. tas says:

    Wonder how that would work in Florida. In Florida, you cannot place a lien against homestead property except in very limited circumstances such a construction, mortgage or taxes. No un-secured loan is worth squat like that.

  40. markg8 says:

    “Please elaborate on Biden’s role in rewriting the bancruptcy laws.

    Anyone involved in foisting that garbage on America is not fit to be president!”

    That’s exactly what I wrote him at the time after watching him on CSPAN. The expert from Harvard on credit traps etc had just made a brilliant presentation on how the proposed bankruptcy reform could cripple the middle class and hence the economy for the benefit of a few big banks and the first words out of his mouth to her were a sneering, “You’re a real piece of work aren’t you?”

    Joe Biden doesn’t get it, he never has and he never will.

  41. markg8 says:

    “Please elaborate on Biden’s role in rewriting the bancruptcy laws.

    Anyone involved in foisting that garbage on America is not fit to be president!”

    That’s exactly what I wrote him at the time after watching him on CSPAN. The expert from Harvard on credit traps etc had just made a brilliant presentation on how the proposed bankruptcy reform could cripple the middle class and hence the economy for the benefit of a few big banks and the first words out of his mouth to her were a sneering, “You’re a real piece of work aren’t you?”

    Joe Biden doesn’t get it, he never has and he never will.

  42. justsayin says:

    BARRY,

    As Ken points out, TILA’s statute of limitations is a REAL kicker here, cutting off recission as a remedy after a certain time. (Unfortunately it’s not as clean as Ken’s statement of an across-the-board 1 year rule, it’s more like a ‘sometimes 1, usually 3, but in a few cases potentially more’ rule.) TILA has detailed rules, so “WTF did the various legal departments involved actually do” is not fair – the broker can write down the wrong amount on an otherwise legal form and blow TILA that way. Overstate the total finance charge over the life of the loan by $7.24 = TILA violation – that actual case went to the Fla. supreme court. (I’m betting some lenders got greedy and just skipped on even using a legal department, but those that actually did are still at risk for TILA mistakes of a math, rather than legal, nature.)

  43. DavidB says:

    Craving returns that are higher than plain-vanilla stocks and bonds, public pensions poured billions of dollars into hedge funds at a time of low volatility and solid returns.

    I was just thinking today how all those written down assets would now be prime plucking for pension funds looking for yield. I know the Canada Pension Plan up in Canada has been looking for assets to spend its huge cash hoard on. This mess is going to give the big yield seekers some good opportunities

  44. ELS says:

    This may have already been mentioned, but to rescind a contract, both sides give up what they got and go back to the status quo ante. Where is a borrower going to get several hundred dollars to give back to the bank?

  45. VJ says:

    Dan,

    Shouldn’t some of the blame fall on the consumer that lied about how much money they make? The banks deserve a lot of the blame, but so does the borrower. If they had told the bank the truth in the beginning, half of these loans wouldn’t exist today.

    They weren’t called “Liar Loans” because homeowners collectively decided to misrepresent their income on mortgage applications. They were called “Liar Loans” because lenders told the applicants how much they needed to write down as income to qualify for the loan.

    It’s all about the Benjamins.
    .

  46. Ben says:

    ELS, I sure didn’t notice it anywhere. Quite a crew commenting today. ‘Unsecured’ doesn’t mean you don’t have to pay. The ABA thanks you, however, for all the lawsuits this article will start. Lawyers, charge for initial consultations!!!

  47. Truth in Lending

    Customers fight back:
    This seems to be where many of the subprime 2/28 ARMs ran afoul: They failed to meet the disclosure laws regarding actual interest amounts and payments.
    Who has gotten tagged with these cases so far? Subprime lender NovaStar Fi…

  48. Below is the relevant portion of the statute that deals with the stricter disclosure requirements. In short, the statute deals with what would be consider (on a Federal level) a high cost loan. Most lenders try not to originate high cost loans because of the extra disclosure requirements and tend to reduce the fees and rate to come just below their benchmarks. My gut is this will have little relevance for the vast majority of loans originated. And for the loans originated that were high cost I bet the their are more correct disclosures than you would expect.

    (aa)(1) A mortgage referred to in this subsection means a consumer credit transaction that is secured by the consumer’s principal dwelling, other than a residential mortgage transaction, a reverse mortgage transaction, or a transaction under an open end credit plan, if–
    (A) the annual percentage rate at consummation of the transaction will exceed by more than 10 percentage points the yield on Treasury securities having comparable periods of maturity on the fifteenth day of the month immediately preceding the month in which the application for the extension of credit is received by the creditor; or
    (B) the total points and fees payable by the consumer at or before closing will exceed the greater of–
    (i) 8 percent of the total loan amount; or
    (ii) $400.
    (2)(A) After the 2-year period beginning on the effective date of the regulations promulgated under section 155 of the Riegle Community Development and Regulatory Improvement Act of 1994, and no more frequently than biennially after the first increase or decrease under this subparagraph, the Board may by regulation increase or decrease the number of percentage points specified in paragraph (1)(A), if the Board determines that the increase or decrease is–
    (i) consistent with the consumer protections against abusive lending provided by the amendments made by subtitle B of title I of the Riegle Community Development and Regulatory Improvement Act of 1994; and
    (ii) warranted by the need for credit.
    (B) An increase or decrease under subparagraph (A) may not result in the number of percentage points referred to in subparagraph (A) being–
    (i) less that 8 percentage points; or
    (ii) greater than 12 percentage points.
    (C) In determining whether to increase or decrease the number of percentage points referred to in subparagraph (A), the Board shall consult with representatives of consumers, including low-income consumers, and lenders.
    (3) The amount specified in paragraph (1)(B)(ii) shall be adjusted annually on January 1 by the annual percentage change in the Consumer Price Index, as reported on June 1 of the year preceding such adjustment.
    (4) For purposes of paragraph (1)(B), points and fees shall include–
    (A) all items included in the finance charge, except interest or the time-price differential;
    (B) all compensation paid to mortgage brokers;
    (C) each of the charges listed in section 106(e) (except an escrow for future payment of taxes), unless–
    (i) the charge is reasonable;
    (ii) the creditor receives no direct or indirect compensation; and
    (iii) the charge is paid to a third party unaffiliated with the creditor; and
    (D) such other charges as the Board determines to be appropriate.
    {{4-30-97 p.6569}}
    (5) This subsection shall not be construed to limit the rate of interest or the finance charge that a person may charge a consumer for any extension of credit.

  49. J. Dunn says:

    here’s the real rub: This kinda makes you wonder what sort of due diligence the secondary market actually did on these basic non-compliant loan errors in the sub-prime market.

    My guess is this is a feature, not a bug: There’s no money in spoiling the party. Just as stock analysts were corrupted by the investment banking side, or accounting firms by big bucks made by consulting for the same firms they were auditing.
    Probably more lawsuits in the works.

    If my recent experience with ID theft and subsequent mortgage fraud is any indication, all of this holds, in spades. Even the most cursory of due diligence should have caught this thing, but nope! Suddenly I “owned” a house with mortgage payments higher than my monthly take-home. I got it cleared off of my credit suprisingly easily, but I bet either NovaStar(poetic justice, that, in light of what we’re hearing about them lately) or their insurers ate it.

    They must have been handing loans out like candy for anyone to be able to get away with something as laughable as this was. The fake documentation was paper-thin and implausible. Simply googling me plus the name of my town would have easily revealed that I’m not a 40 year old Haitian man, and they didn’t even bother faking the driver’s license they used properly, so a simple check on the number should have thrown red flags too. Likely a corrupt broker and/or appraiser was involved, but if everyone up the chain is willing to buy any kind of crap paper shoved in front of them without really even looking into its provenance, well, varying degrees of fraud and negligence at the ground level become pretty inevitable. What’s the incentive to do your homework when you can just sell on and take your commission? And what’s the risk of trying some opportunistic fraud, especially when it’s so easy to become a fly-by-night “broker” and so unregulated at that level. What a hideous mess, top to bottom.

  50. boomer says:

    Get a life! the majority of these people knew 100% what they were doing but are now lookig for the easy way out. Red lining, unfair lending, if not for sub-prime they never would have gotten a loan period. They pay off unsecuritized debt and run their credit in the ground and can not get refinanced again. If they knew what they were doing they would not be where they are now. There are cases but the majority of these people are irresposible and want to use the system. Stated, fixed income, interest only, negative ams grow up and be counted. I bet over 50% are on disabilty and using the system the same.

  51. LoanSafe.org says:

    I’m not sure everyone that visits this great blog understands what happened over the last few years in the mortgage industry. It was all about numbers, volume, closings, orginations, AT ALL COSTS!

    I don’t care if you were a loan officer or processor for a broker or a lender, fraud was just part of the game to make more money. Loan officers, brokers, lenders, managers, account executives, underwriters, processors, and appraisers all had their hands in the cookie jar of fraud.

    Not everyone of them but when you have 10 people touching a file and contributing to it then it gets to the point where everyone is good at what they do and if one person in that chain of people who worked on that file cuts and pastes a signature, inflates value, foregets a disclosure, doesn’t disclose YSP etc. then you have TILA violations. I bet they are on 80% plus of the mortgages that were originated over the last few years.

    As soon as all these attorneys and foreclosure prevention companies get to these borrowers (with mass marketing like we are seeing now) the more homeowners will use the TILA and bankruptcy to stop foreclosure.

    Moe
    Founder
    LoanSafe.org

  52. Paul says:

    Just perused this thread (the link was emailed by an associate) and will agree with those that see how big a role the TILA will play in saving borrowers from losing their homes.

    In the past few months, my firm has been using TILA violations to rescind loans in cases where the borrowers were lied to and cheated by brokers. It’s true that these borrowers can’t afford to hire lawyers and bring a full tilt lawsuit for fraud against the brokers, but when faced with obvious violations of the TILA, the lender will rescind the loans and this provides relief to our clients.

    And then? The lenders turn around and sue the brokers. As for those saying the borrowers are responsible for their own predicament, maybe in some cases that is absolutely true, but not for most of the people contacting our office. We find that many unsophisticated but trusting people, and usually not fluent in English, are flat out lied to about the terms of their loan by these fly by night brokers who jumped into the business just a few years ago. When given documents in English and “translated” by their broker, it is easy to see how forms get signed.

  53. nesNYC says:

    This is business as usual in banking circles. Anyone familiar with “Truth in lending” laws know that most credit card on the markets are patently illegal since most banks cannot lend across state lines. Why are most based in Delaware anyway? LOL!

    Many people have gotten their CC charges rescinded by pointing out the obvious “fine print” and what the law actually says. It’s pretty logical the banksters and other “creative financing” folks knew exactly what they were doing. What’s unbelievable is that they got away with it for so long without no one really catching on or because they also profited from the scams.

  54. marianne says:

    Residential subprime lending is in the soup here. Commercial subprime lending not at all. That is because lending institutions like Ocean Capital in Rhode Island that specialize in subprime and stated income loans takes a longer and closer look at the borrow and the circumstances and keeps up the close relationship throughout the life of the loan. Subprime commercial lending is oftentimes the only opportunity for certain new business developoment and should be retained.

  55. linda white says:

    Just wanted some other opinions. MY 80 year old mother contacted Countrywide home loans to take out a loan on her “paid off home” to pay some other debts for $36,000, they talked her into $50,000, her name was not the only name on her house so they told her to have my brothers name taken off the house. The notary, who was supposed to verify his signature was not there, but his signature was nortarized. My mothers house is worth $500,000. This was 2 years ago and we just found out about this. She and my brother never signed any papers or recieved and papers with their signatures. For the last 6 to 8 months she has been getting calls from Countrywide to refinance. They also make her get flood insurance although she is not in a flood area. My mother would not and could not understand any type of legal documents if her life depended on it. She has never even had a checking account. She uses my deceased fathers checking and credit cards. Her credit is zilch. She receives $1100 a month from SSA and has to pay $780 a month for this 30 year mortgage. DOES THIS SOUND LIKE A SCAM ON THE ELDERLY????

  56. ray nwam says:

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  57. pat says:

    I have a situation. My sister was in Chapter 13 bankrupcy and was going to loose her home.She needed $525,000 to sell the house. I agreed to buy it from her for that price and secured a mortgage. She had to exit bankrupcy so that she could sell the house to me. We had a small window (2 days) in which to tranfer the home so that forclosure would not occur. After she exited bankrupcy, my mortgage company changed the terms of the loan, increased the interest rate and made me borrow an extra $25,000 to pay her so that she would have enough money to pay off her creditors. Is that a violation of the TILA? I didn’t see the paperwork till the time of closing and I had no choice but to accept the terms. Thanks for your help

  58. D Andrews says:

    Should I be concerned about a two HUD closing docs whereby both HUD’s are Identical except that one shows a 2nd mortgage and the other lacks that same entry?