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Judge Rules Wells Fargo Engages in “Reprehensible,” Systemic Accounting Abuses on Mortgages, Hits with $3.1 Million Punitive Damages for One Loan

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One of our ongoing frustrations about media coverage of the mortgage mess is its failure to pay much attention to ample evidence of substantial servicer overcharges to borrowers. It’s bad enough that that happens, but far worse is that when servicers are told that they’ve been caught out, they refuse to make corrections and stonewall court-ordered remedies.

The facts that have surfaced before one bankruptcy judge, Elizabeth Magner of the Eastern District of Louisiana, and one servicer, Wells Fargo, should give industry defenders pause. Wells, as we have pointed out repeatedly, has an annoying habit of piously claiming it is better than other servicers when it engages in the same indefensible conduct as its peers. So if you were to take Wells at its word, the conduct of other servicers is at least as bad as what has taken place in this jurisdiction, if not worse. Remember, servicers are highly routinized operations, so if something, it is almost certain to be standard practice. And Wells has admitted that in this case.

Here is a snippet of background from another case in Magner’s courtas recounted by the Center for Public Integrity:

In an April 2008 ruling, Elizabeth Magner, a U.S. bankruptcy judge in New Orleans, rejected the two charges [for broker price opinions charged when the parish in which the home was located was evacuated thanks to Hurricane Katrina] as invalid. She also disallowed 43 home inspections, 39 late charges, and thousands of dollars in legal fees charged to the Stewarts’ account.

Almost every disallowed fee was imposed while the Stewarts were making regular monthly payments on their home…

Magner determined that Wells Fargo had been “duplicitous and misleading” and ordered the bank to pay $27,000 in damages and attorneys’ fees. She also took the unusual step of requiring the servicer to audit about 400 home loan files in cases in the Eastern District of Louisiana.

Wells fought successfully to keep the results of the audit under seal, and last summer a federal appeals court overturned the part of Magner’s ruling that required the audit. But two people familiar with the results told iWatch News that Wells Fargo’s audit had turned up accounting errors in nearly every loan file it reviewed.

The latest example of Wells bad behavior in Magner’s courtroom that has come to a resolution of sorts is another case of Wells overcharging a borrower. In this suit, Jones v. Wells Fargo, filed in 2007, involved a borrower having to sue Wells to recoup overcharges by Wells plus actual damages, plus a request for punitive damages. The ruling sets forth the sorry history in some detail and I strongly suggest you read it in full.

In Re Jones

Jones was awarded over $24,000 plus interest on the overcharges. Manger determined then that additional amounts were due because Wells had violated the bankruptcy stay because it applied payments made during the bankruptcy to charges that had not been authorized by the court and thus in violation of the plan of reorganization. She ruled Wells’ conduct to be willful and egregious. The ruling noted (emphasis ours):

Despite assessing postpetition charges, Wells Fargo withheld this fact from its borrower and diverted payments made by the trustee and Debtor to satisfy claims not authorized by the plan or Court. Wells Fargo admitted that these actions were part of its normal course of conduct, practiced in perhaps thousands of cases.

Wells agreed with Magner to remedy certain “systemic problems” with its record keeping. In this ruling, the court also awarded Jones over $67,000 in compensatory sanctions.

Four months after the initial ruling on this case, the Stewart case (the one with the clearly bogus broker price opinions) was filed. The violations were identical to the ones in the Jones case, and this took place after Wells had agreed to fix this sort of accounting problem . Among other things, applying payments to fees first, when they are required to go to principal, interest, and escrow first, which resulted in improper amortization, which then led to additional interest, default fees and costs being incurred. Those additional charges were done without obtaining approval of the court and were flat out not permitted (this is a blatant violation of well established procedures in bankruptcy, hence the vehemence of Magner’s reaction. And notice this comment from her ruling:

The evidence established the utilization of this application method for every Wells Fargo mortgage loan in bankruptcy.

To make a long story short, Wells repeatedly engaged in scorched earth tactics:

While every litigant has a right to pursue appeal, Wells Fargo’s style of litigation was particularly vexing. After agreeing at trial to the initial injunctive relief in order to escape a punitive damage award, Wells Fargo changed its position and appealed. This resulted in:

1. A total of seven (7) days spent in the original trial, status conferences, and hearings before this Court;
2. Eighteen (18) post-trial, pre-remand motions or responsive pleadings filed by Wells Fargo, requiring nine (9) memoranda and nine (9) objections or responsive pleadings;
3. Eight (8) appeals or notices of appeal to the District Court by Wells Fargo, with fifteen (15) assignments of error and fifty-seven (57) sub-assignments of error, requiring 261 pages in briefing, and resulting in a delay of 493 days from the date the Amended Judgment was entered to the date the Fifth Circuit dismissed Wells Fargo’s appeal for lack of jurisdiction;47 and
4. Twenty-two (22) issues raised by Wells Fargo for remand, requiring 161 pages of briefing from the parties in the District Court and 269 additional days since the Fifth Circuit dismissed Wells Fargo’s appeal.

The above was only the first round of litigation contained in this case….

The judge also describes Wells’ “reprehensible” conduct:

Wells Fargo has taken the position that every debtor in the district should be made to challenge, by separate suit, the proofs of claim or motions for relief from the automatic stay it files. It has steadfastly refused to audit its pleadings or proofs of claim for errors and has refused to voluntarily correct any errors that come to light except through threat of litigation. Although its own representatives have admitted that it routinely misapplied payments on loans and improperly charged fees, they have refused to correct past errors. They stubbornly insist on limiting any change in their conduct prospectively, even as they seek to collect on loans in other cases for amounts owed in error.

Wells Fargo’s conduct is clandestine. Rather than provide Jones with a complete history
of his debt on an ongoing basis, Wells Fargo simply stopped communicating with Jones once it
deemed him in default. At that point in time, fees and costs were assessed against his account and satisfied with postpetition payments intended for other debt without notice. Only through litigation was this practice discovered. Wells Fargo admitted to the same practices for all other loans in bankruptcy or default. As a result, it is unlikely that most debtors will be able to discern problems with their accounts without extensive discovery….

Over eighty (80%) of the chapter 13 debtors in this district have incomes of less than
$40,000.00 per year. The burden of extensive discovery and delay is particularly overwhelming. In this Court’s experience, it takes four (4) to six (6) months for Wells Fargo to produce a simple accounting of a loan’s history and over four (4) court hearings. Most debtors simply do not have the personal resources to demand the production of a simple accounting for their loans, much less verify its accuracy, through a litigation process.

Wells Fargo has taken advantage of borrowers who rely on it to accurately apply payments
and calculate the amounts owed. But perhaps more disturbing is Wells Fargo’s refusal to voluntarily correct its errors. It prefers to rely on the ignorance of borrowers or their inability to fund a challenge to its demands, rather than voluntarily relinquish gains obtained through improper accounting methods. Wells Fargo’s conduct was a breach of its contractual obligations to its borrowers. More importantly, when exposed, it revealed its true corporate character by denying any obligation to correct its past transgressions and mounting a legal assault ensure it never had to.

Society requires that those in business conduct themselves with honestly and fair dealing. Thus, there is a strong societal interest in deterring such future conduct through the imposition of punitive relief….

The word “predatory” is not adequate to describe Wells’ conduct. The bank is not simply willing to steal from consumers, via blatant, institutionalized violations of its own agreements on mortgages and later on bankruptcy plans. It has absolutely no respect for the law, whether it be contracts or court procedures. It’s a band of marauders that our society treats as legitimate because the perpetrators wear suits and can afford to hire lobbyists. And the Federal government and state attorneys general are certain to have emboldened Wells and its brethren by rewarding them rather than treating them like the criminals they are.

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79 comments

    1. R Foreman

      That’s exactly what I was thinking halfway through the article. The judge needs to take care for her safety. There is no honour among thieves and marauders.

  1. Woodrow Wilson

    “It has absolutely no respect for the law” -

    None of this will stop until bodies are hanging from lampposts. Our justice system is obviously not going to put handcuffs on these people, forget about CONgress, they’re in on it.

    As the judge correctly pointed out, it’s the cost of doing business for Wells ignoring the law. Will $3 million be the benchmark for integrity? My guess is no, as for every $3 million dollar case, they can loot twenty others. There are simply no significant consequnces being forced upon these people, and their enablers, so this behavior will continue unabated.

    Until then, enjoy watching your fellow Americans being looted and pillaged at will.

    1. rafael bolero

      Wells Fargo used to protect the strong box and shoot the robbers, now they loot the strong box and are the robbers. This is a Western we need to make! Just call it, Wells Fargo, and have them protecting AND robbing the stage coach. And, both owning the bank and robbing the bank. Make the lead character a psychopath who wears a mask while thrill robbing in his ‘free time,’ and a suit when in the bank or around town. Yeah, with a lovely girlfriend. The only way many Merikans grasp anything is when it is presented as fiction.

      1. Rotter

        Too bad Harvey Korman has gone to the Mel Brooks movie set in the Sky…he could have been the CEO of Wells in your movie

        1. just me

          I’m thinking Lily Tomlin/Ernestine: “We’re the phone company. We don’t care. We don’t have to.”

          Won’t Wells Fargo just refuse to pay the $3.1 million?

          1. Procopius

            Oh, they won’t refuse to pay it. They might appeal it first, but more likely they’ll just “forget” to pay it until the plaintiff sues again. Or else it will be credited to a different account because of their normal procedures, and the plaintiff will be charged another bogus expense.

          2. Nathanael

            They’ll appeal this one trying to find a sufficiently crooked court. Why? Because Judge Magner is not only honest, she’s also figured them out: so if they refuse to pay, she’ll authorize the victims to start seizing Wells Fargo branches. A tactic which has worked before.

  2. DP

    Prosecute John Stumpf and other senior Wells Fargo executives under RICO and then nationalize this criminal enterprise.

    1. Rcoutme

      Good luck with that. Pat Byrne has been trying to get a RICO case against Goldman Sachs and Merril Lynch for years. It is not as easy as you might think.

      1. harposox

        Foreclosure RICO was attempted here in Illinois here as well by a lawyer named Robert Stone, against a consortium of banks… I’m afraid I couldn’t parse the court filings very well, but from what I did understand of it his suit was pretty much dismissed out of hand. He touched on all of the hot-button securitization issues, but it’s unclear to this legal zero whether the dismissal was legit or just due to counsel’s rank incompetence.

        1. alex

          “it’s unclear to this legal zero whether the dismissal was legit or just due to counsel’s rank incompetence”

          Or the most likely explanation of all: the automatic rejection of any attempt to prosecute banks just because they’ve blatantly and deliberately broken the law.

          Can you imagine what kind of society we’d have if that sort of thing was allowed? Can you imagine America’s largest financial corporations being held acountable for their actions and the rule of law? What are you, a commie, an anarchist, or a terrorist?

          1. pedex

            At this point the govt itself can be prosecuted under the RICO statutes for many of its actions.

    2. just me

      Bill Black was asked about RICO when he had his live chat on FDL in February. His reply was:

      http://firedoglake.com/2012/02/17/live-chat-william-k-black-the-foreclosure-settlement/#comment-2492830

      As a litigator, I know that most courts are hostile to the use of RICO v elite white-collar criminals. The primary potential advantage RICO gave me in civil suits was treble damages. In virtually every case, however, I could prove regular damages that exceeded the defendant’s ability to repay. So, bringing a RICO action meant a lot more work, allowed the defense to delay the case through motions, pissed off many judges, and got me nothing useful.

    3. sulphurdunn

      Strumpf’s first job in finance was as a repo-man for a bank in St. Paul. Nothing has really changed.

  3. ArkansasAngie

    The law was broken in our backyards. If you want to see people arrested/fined ask those who are running for county judges, prosecutors and attorney generals to do their jobs and protect their constituents.

    This week I will start contacting those who are running for office and ask them what their stand on this matter is and will make donations to those who say that theywill uphold the law.

    Contact your local papers and ask them to delve into the candidates’ stances on this issue.

    Washington and Wall Street are in cahoots. The only way to stop them is at the local level.

    1. LeeAnne

      Too bad the laws are being changed faster than we can change administrations -if that were a solution. By that I mean, the laws are being changed with retroactive provisions by the criminals themselves. It gives them at least 2 advantages: a monopoly on the particular crime (can small banks compete with this behavior?), and a get-out-of-jail-free card. Like dismantling Glass Steagall.

      Oh, wait a minute, it cost a little more than a hundred mill to pay Robert Rubin -that we know about.

      1. ArkansasAngie

        Oh, wait a minute, it cost a little more than a hundred mill to BUY Robert Rubin -that we know about.

        There fixed it for you

  4. craazyman

    Sometimes it Only Takes One Word

    I met a woman once, while socializing with friends, who worked through the UN to provide humanitarian assistance in war zones.

    She was quietly composed sort of like a nun, although a little crazed in a Joan of Arc way around the edges, and I got the impression she sort of enjoyed being in the midst of the bombs and bullets. She told me a few wild stories –one about negotiating with Congo rebels, with no security team for protection or even a flack jacket — over treatment of child soldiers. There were a few others to. Last I heard she was in Haiti after the earthquake.

    She was half French and had a European intellectual side to her, so as we were socializng over a few glasses of wine at a bistro in New York I asked her why people were so crazy, why societies erupted into chaos and death the way they do.

    If you read the news its like animals, but worse than animals. And I figured maybe she would have sifted her experiences into philosophical or psychological insights that those of us who live safe and quiet lives surrounded by money and safety can only model in our minds.

    She answered the question instantly and in the most unremarkable way, as if I had asked her for the time.

    “Injustice”, she said. And that was all she said.

    1. Jane

      She had it ‘spot on’ didn’t she?

      I wonder when the tipping point will finally come to ‘The Land of the Free, and Home of the Brave’.

      Will we finally have our American Spring to save democracy?

      One thing is for sure, it won’t look like Cairo, or Athens, or Madrid, or London, or even the past violent protests of Paris. It will look a lot worse, because there are more guns in this country than people. And even under a dictatorship in Egypt, they couldn’t get the Army to turn on their own people. And I think our own armed forces have had enough blood and guts on another continent for one decade to muster the strength for a battle in their homeland.

      Can TPTB really think that there will be no consequences for their actions? Are they really that arrogant? They just keep pushing, and pushing, and pushing – will it ever end?

      1. Nathanael

        TBTB are exactly as out of touch as the noblemen at Versailles in 1789. So out of touch they don’t even realize that they’re out of touch. Yes, they are that ignorant.

        Some of them are psychopaths, incapable of feeling anticipatory fear; others are simply going along with the crowd of 0.1%ers led by the psychopaths.

  5. Evil Corps

    Wells Fargo, prisons and payday loans. Oh yeah, and stuff like this:
    “During a 22-month investigation by agents from the US Drug Enforcement Administration, the Internal Revenue Service and others, it emerged that the cocaine smugglers had bought the plane with money they had laundered through one of the biggest banks in the United States: Wachovia, now part of the giant Wells Fargo.”

    1. Stan Jensen

      Another TBTF hides behind the OCC/Treasury, the Justice Department, the FBI, large swath of the Judiciary, the AGs, and the press? What would happen if the 10 Million or so victims were motivated to challenge the living hell out of this criminal enterprise? Will Homeland Security help?

  6. jake chase

    Thanks for this wonderful post. If there were any justice in this world every television station and newspaper would be required to publish and republish the text of this legal opinion 24-7 over the course of the next month. I can only imagine what those as**oles on CNBC might say to explain away this conduct.

    Every once in a great while reality cuts through the ocean of propaganda which constitutes the daily news. No doubt many respectable people will be stunned by the conduct revealed by this opinion. Respectable people never believe bad things are happening until the day a bad thing happens to them. What such people seem to need is a smart blow on the head from a heavy hammer.

    1. PL

      Even if respectable people heard about this case I wonder if it would register that such predatory actions could affect them one day. I suspect many middle class salary earners don’t connect what happens to “deadbeats” with what could happen to them.

      1. Procopius

        I share your doubt. I seem to recall that a very substantial majority supported Obama’s drone killing of Anwar al-Aulaki. I don’t remember if anybody polled about his son and nephew the following month, but I suppose a large majority favored that too. It simply does not seem to penetrate that these policies might be used against them one day. And I’ve come to the realization that this is not really a change in cosmetics, just a removal of the screen that is customarily put around the bed of a dying person.

  7. LeeAnne

    Reading the details makes me dizzy with images of people just trying to live their lives being tortured on a daily basis by Wells Fargo -never forget $380,000,000,000 in drug money laundering without investigation, no Justice Department involved, nothing to see here, and the sainted Warren Buffet.

    1. AndyC

      Leanne

      It was Wachovia and it was $420 billion in drug money but they paid a whopping 3.8 basis points in “fines” while admitting no guilt and yada yada yada…what more do you want?

      : )

      True they were bought out by Wells Fargo

  8. ahi

    So every bankruptcy involving Wells Fargo is open to litigation? Have the sharks started circling? This ruling screams “blood in the water”.

    1. Censure Issa

      Wells Fargo is frighteningly corrupt. “We’re all in this thing together,” Stumpf once said.

    2. Rotter

      OHHHHH Pleeeezz…If theres blood in the water the wounded sharks will be devoured with the chum..thats one of the consequences of being a shark…wells fargo has been turning customers into chum..if its their turn to be eaten then so be it. I love it when the law-of-jungle-invoking arch capitalists start crying no fair.

  9. K Ackermann

    If you can shoot children in Florida, then certainly a bank must be fair game.

    The way the bank indiscriminately assaults people… you wonder if maybe bashing some of their employees across the face with a baseball bat might not be fair turnaround and send a clear message on what to expect by being a member of a criminal gang.

    If you have a loan from Wells Fargo, then they are an existential threat to you.

    1. LeeAnne

      We would do well to look at employees sympathetically for they are us.

      The employees need their jobs and can only hold on to them by taking orders. That’s what’s in store for all of us if the system is changed -peacefully, but radically. Employees do what they’re trained to do or quit. They are as much victims as anyone else.

      The criminal system, just looking out for their own interests, is the revolving door of Banksters/ Washington/Lawyers/Military/Think Tanks/Media -one big corporatocracy; the United Corporations of America, united over the people.

      1. Fred Grandy

        ” We would do well to look at employees sympathetically for they are us. ”
        WTF? So they just robosign, commit fraud and foot soldier along because it’s their job? That’s a seriously demented view point.

        1. LeeAnne

          It wouldn’t seem so demented if you had no health insurance and the only stinken job you could find -be it ever so guaranteed humble and part time. Or maybe you’re unaware to the unemployment figures -just a percentage of the true figures.

          1. I Agree

            Noam Chomsky: It’s a fair assumption that every human being, real human beings, flesh and blood ones, not corporations, but every flesh and blood human being is a moral person. You know, we’ve got the same genes, we’re more or less the same, but our nature, the nature of humans, allows all kinds of behaviour. I mean, every one of us under some circumstances could be a gas chamber attendant and a saint.

          2. LeeAnne

            Sharing the same genes is hardly reason for assuming everyone has the same morality. Morality is subjective. Morality looks to authority for its legitimacy.

            It is the authorities in this case who are totally corrupt, and the authorities who need to be confronted, tried in a court of law, punished, and stopped; not their employees.

            Blaming things on ‘employees’ is one way of letting them off the hook while the people are encouraged to fight against each other.

          3. joel3000

            A small percentage of people are sociopaths and psychopaths. They do not have a conscience or the ability to empathize. They are especially dangerous in positions of power. A widening wealth inequality distribution makes them even more dangerous.

            Those who call for ropes and lampposts may not be too far from wrong about working solutions, but I really hope we don’t have to go there. That’s not good for anyone.

        2. Mark P.

          ” We would do well to look at employees sympathetically for they are us. ”

          Do you imagine that there’s anybody up to and including the CEO level who couldn’t sing this song about how they’re just doing what they’re doing to keep their jobs, health insurance, family assets, etc?

          So, yes, look at employees sympathetically and then TARGET THEM strategically and tactically.

          Individuals commit the crimes that the corporate environment encourages them to and imagine that being part of a corporation protects them from reprisals in ways that few street operators would ever think they’re protected.

          Individuals are the agents and component entities of corporations.

          Corporate behavior changes when we start targeting individuals in corporations and create incentives and costs that make it easier for them to act morally than immorally.

      2. JTFaraday

        “The employees need their jobs and can only hold on to them by taking orders. That’s what’s in store for all of us if the system is changed -peacefully, but radically. Employees do what they’re trained to do or quit. They are as much victims as anyone else.”

        I think the problem with the most recent financial crisis is more that loan officers and real estate professionals DID NOT “do what they they were trained to do,” thus they were a fundamental part of the problem, collusive actors.

        These people have professional organizations. They were not powerless victims, and are in fact, still victimizing others.

        No one is fingering the part time clerical help that suspects something isn’t right, but isn’t trained in much of anything. That’s a person “who takes orders.”

        The point of professionalization is that you DON’T “take orders.”

        1. JTFaraday

          the risk managers didn’t do “what they were trained to do”… the rating agencies didn’t do “what they were trained to do”…

          Every time some “job guarantee” propagandist starts babbling about how “deskilling” unemployment is supposed to be, I just ROLLS my eyes…

    2. PQuincy

      I recently financed a home loan. The bank I chose was not offering a slightly better rate and price than the other possibilities — but the fact that it was a branch of a non-US banking corporation was a major factor in the decision as well. To be sure, the US branches of Canadian banks are still folliwing US rather than Canadian law, and probably US banking culture — but there’s at least a hope that the somewhat less exploitative and insane Canadian banking regulatory structure rubs off on the US subsidiary. One can hope….(sigh). I would not even consider taking a mortgage from Wells or BoA — notorious criminals in this particular branch of banking, after all…

  10. Pearl

    Just wanted to “second” Yves’ suggestion that you guys read this case in full. Wells’ utter disregard for the law and disrespect for Judge Elizabeth Magner’s Court is downright scary.

    If anyone wants additional information on the genesis of the In Re Jones case, one of our dear colleagues on the fraudclosure front has made these links available–sans costs associated with the subscription-based legal sites.

    The individual items that he has posted thus far in the In Re Jones case are:

    http://www.scribd.com/doc/88424484/In-Re-Jones-Case-No-06-01093-Doc-153-Supplemental-Memorandum-Opinion-29-Aug-2007

    http://www.scribd.com/doc/88425797/In-Re-Jones-Case-No-06-01093-Doc-154-Amended-Judgment-29-Aug-2007

    http://www.scribd.com/doc/88423215/In-Re-Jones-Case-No-06-01093-Doc-470-Opinion-on-Punitive-Damages-Award-05-Apr-2012

    http://www.scribd.com/doc/88423215/In-Re-Jones-Case-No-06-01093-Doc-470-Opinion-on-Punitive-Damages-Award-05-Apr-2012

    BTW, Mr. Roper’s general “library” of Scribds on all subjects “fraudclosure related” are as good as gold–optical character recognition, keyword tagging, etc. A veritable treasure trove:

    http://www.scribd.com/my_document_collections/3565808

  11. Tom Stone

    Hi Pearl! Keep up the good fight. I just sent this to a BK trustee I am acquainted with. I recommend anyone else with a similar acquaintance do the same.

  12. Gil Gamesh

    Badges? We don’t need no stinking badges.

    Look for Obama to immunize this specie of Creditor Class conduct. It’s the least he can do.

  13. steelhead23

    Totally nauseating – and unsurprising. Apparently, this is precisely the form of economic servitude TPTB wish for us to endure.

  14. F. Beard

    One good thing about the bust is that it forces the banks to behave like the villains they always are.

    “Respectable”? Hah!

  15. Tyzão

    Obama should change his choice for the head of the World Bank and chose somebody who really knows how the system works, and will focus on the real problems of the developing world: jobs, infrastructure and poverty reduction — Ngozi is the best candidate for the job!

    Perhaps you have a post lined up?

  16. Liquidation and Receivership

    Black and Wray wrote of BOA:

    1. disproportionately large rates of loan delinquencies and defaults
    2. huge losses upon default, and
    3. fraudulent representations and appraisals.
    4. suspected widespread fraud in the “reps and warranties”

  17. K Ackermann

    Elizabeth Magner is probably going to get hit with a writ of mandamus for not doing exactly as the banks told her to do.

  18. ericmcsquare

    Yves,

    If you want to stop these Bankruptcy abuses there needs to be a massive switch in all the separate bankruptcy districts from Trustee pays pre-petition districts to Trustee pays-all districts (Trustee pays all districts are currently in the minority). This would require amending the local rules in each district (easier than getting Congress to pass sweeping bankruptcy legislation).

    The reason being, is that in Trustee pays-all districts the Trustee has all the necessary documents to police the servicers and bring them to heel if abuses are identified (a good example is the WDPa case of Hill v. Countrywide which was probably the first of the cases to bring servicer bankruptcy abuses to light).

    Moral of the story: Pressure needs to be exerted on the local rules committees of each bankruptcy district to have the Chapter 13 Trustees pay post-petition mortgage payment as then you have a well financed lawyer that has a vested interest in making sure no abuses happen (Chapter 13 Trustees do not like to be viewed as controlled by the banks).

  19. Conscience of a conservative

    There needs to be true repercussions with regards to bank mal-behavior, especially in the mortgage servicing space. That said, if and when such fines are levied and if the fines were to have teeth, the banks will exit the business.

    1. F. Beard

      the banks will exit the business. Conscience of a conservative

      And we should miss counterfeiters?

      1. Conscience of a Conservative

        It’s just ironic that the bad behavior is rewarded with profits, that at the first sign of “serious” repercussions the bank takes write-offs , sells and exits the business after years of ill gotten gains. The problem is our regulators have been captured and will never make the penalties significant enough or attach them to the individual.
        If individuals would have been charged in the robo-signing scandal we would have seen a very different result.

        1. Nathanael

          Attaching penalties to individuals is crucial; every corporate executive who does 25-to-life and comes out destitute reduces the number of later corporate execs who break the law. (Though the genuine psychopaths still will break the law, it’s a deterrent for the others.)

          Unfortunately the US hasn’t been imprisoning criminal bank execs and taking all their money.

    2. PL

      I doubt banks will exit the servicing business if they are hit with fines. There’s just too much money to be made even if trickery with payment applications becomes too risky. Rather, I think banks will adjust their practices to avoid fines and still make enough money to justify servicing loans. Banks would like us to think the opposite so that the courts and regulators are apprehensive about punishing misdeeds.

  20. abelenkpe

    I’m sure Wells has not behaved any better in CA. Still hoping all big banks are nationalized.

  21. Guy_Fawkes

    If anyone is shocked by these rulings, you haven’t been paying attention.

    What is shocking is that apparently, this judge isn’t bought. Can I ask for a “halleyujah”??? Altogether now.

  22. Eric L. Prentis

    The status-quo elite banksters are greedy, selfish, narcissistic, psychopathic criminals who use more-and-more public debt, combined with spin, lies and propaganda, dished out by their corporate media TV stations, to try to convince the sheeple that all is well and the Wall Street criminals should remain in charge.

  23. craazyman

    whoa! what a brainstorm.

    Maybe they could securitize punitive damages from lawsuits against the banks!

    AAA tranches get the most outrageous larcenies while the equity tranch gets boilerplate egregious document mismanagement.

    Yeah. Put some talent behin this and make it go.

    1. skippy

      Great idea. The formula is prepackaged too!

      Skippy… how long till diminishing returns signals shorty. Btw how would you define subprime punitive damages, it is a key metric.

    2. Doug Terpstra

      Hey, that’s ready made for the JOBS Act, the perfect bucket shop op. No regulators, no SEC meddling, no accounting required. Let’s fire up a boiler room phone bank.

  24. Pat

    A note to those who follow the foreclosure/MERS scene:
    I listened to a recent talk by several leading mortgage lawyers in California. They said that Cal. courts have been for the most part been very unsympathetic to foreclosure challenges (esp. injunctions to halt foreclosures), and will continue to be so in the future. This is because of specific Cal. laws (esp. the “tender rule”) and general assumptions and attitudes about foreclosures in one-action, nonjudicial foreclosure states like California.
    The only times (?) where homeowners in Cal. have been successful is where the foreclosure occurs in connection with bankruptcy proceedings, because federal law (bankruptcy law) trumps state law.

    The upshot of this is that MERS (or where’s the note or procedural) problems will not pose any obstacles to banks foreclosing in California, or for that matter, any of the (mostly) Western states, which are one-action and have nonjudicial foreclosures. If there’s going to be any revolt against bad foreclosures and servicer abuses, it has to be the Eastern states (or in bankruptcy courts).
    The banks in Cal. will continue to foreclose, and can either sit on the properties or try to sell them to the own-to-rent-out bottomfeeder crowd.

    One other interesting tidbit that the lawyers mentioned: if even one mortgage in a REMIC defaults, then the whole REMIC blows up. Wow. Can that be true?
    If so, you can imagine that the vast majority of RMBS/REMICs are going to lose their legitimacy, and the RMBS holders (if they have any sense) will try to put them back en masse to the banks. And not just residential RMBS, but those for commercial properties too.

    1. Nathanael

      The California courts haven’t woken up to the title fraud involved in the foreclosure frauds. The first time two different companies attempt to steal the same house, they might wake up.

  25. Timoteo

    What about what’s in the best interests of the shareholders? WFC is still saddled with the cleaning up of the Golden T6rd Financial it inherited from Wachovia when it took over Wachovia. They gotta get money from someplace or someone. It is not like Thompson, Cayne, Mozillo, Fuld, Killinger, Prince and the rest of them that dumped $3 to $4 trillion in bad debt on US taxpayers and their Treasury from over leveraged business operations are ever going o face a judge for sentencing. Karl Marx was certainly no economist, but his predictions that these banks would drive us into poverty and that we would ultimately all fall prey to Oligarchy and Plutocracy has been as prescient as Orwell’s prediction of an information society. To the very end Kennedy Thompson insisted the deal to acquire the Golden T6rd Financial was one of his best decisions of his career as a banker.

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