Arizona Representative Drops Chain of Title Notification Provision After Apparent Bribe by Servicer

If you thought the Friends of Angelo program, via which Countrywide gave very favorable mortgage terms to assorted Congresscritters, was pretty bald-faced, you ain’t seen nothin’ yet.

It appears the best way to get a deep principal mod in America is to represent a clear and present danger to the mortgage industrial complex.

The object lesson was Arizona Senate bill 1259, which passed 28-2 and created heart palpitations in bank offices all over the US (see the text here). It would have required that banks disclose chain of title and required that the foreclosing party reimburse legal fees when the plaintiff failed to prove ownership. Ouch!

A full bore effort was mounted to kill it. As the bill’s Senate sponsor, Senator Reagan, wrote (hat tip Matt Weidner):

I was told the bill was DOA in the House before it even got out of the Senate. It was “double-assigned” meaning it had to pass two committees instead of just one. In addition, the Chair of the Banking and Insurance committee in the House did not like the bill and was not going to give it a hearing, meaning the bill was dead. By the way, it is completely within the right of any committee chair to kill a bill.

But it gets better. Martin Andelman uncovered a seamy part of this story. A realtor who also audits trustee sales, one Darrell Blomberg, was keen to revive the bill and enlisted Representative Carl Seel. But weirdly, Seel was late to the legislative session and thus missed his opportunity to offer the amendment as planned.

This seems pretty innocent, right? Think twice. From Andelman (hat tip April Charney):

When Rep. Seel was asked what had happened to prevent him from showing up on time to propose the amendment, he explained that he had decided not to propose it because he was told there was no chance of it being adopted… something about it not being “germane,” whatever that means.

One thing though… from what Darrell explained to me, Carl Seel must have been in a very good mood the day of his unexpected tardiness, because even though he had been previously turned down twice for his own loan modification, two days before he showed up too late to propose the amendment, Ocwen granted him a PRINCIPAL REDUCTION that reduced his mortgage to $88,000 from roughly $190,000… that’s a reduction of approximately 56% give or take a few points one way or the other.

Now that is lucky, was all I could think to say. Really lucky, considering it was Ocwen, a servicer I’ve been told is among the most difficult when it comes to modifying loans. In fact, it’s almost like being the single-ticket-lottery-winner-three-days-in-a-row kind of lucky, wouldn’t you say?

So, how did Darrell know about the fortuitous timing of Mr. Seel’s generous principal reduction?
It’s quite simple really… Seel hired him to help him with his loan.

You see, according to Darrell Blomberg, Rep. Seel had asked him to conduct an audit of Seel’s trustee sale in an effort to postpone his own home’s sale, which had been scheduled after his servicer denied his loan modification application for the second time. And Darrell had forwarded the results of his examination to Ocwen in a letter outlining several discrepancies in an attempt to delay the sale date.

As a result of that close involvement, Darrell says he personally saw the paperwork indicating both the trustee sale was being cancelled and that the significant principal reduction was being granted as part of Seel’s loan modification. He even went over it with Seel, telling him he hadn’t seen many… if any… like this one.

If you are in Arizona, demand an ethics investigation. This isn’t even subtle. And it won’t be hard to find plenty of industry insiders like Blomberg who will attest that the Ocwen mod isn’t just irregular, it’s unheard of.

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  1. Tom Crowl

    You ever see that statue they always show in connection with the law and justice?

    You know the one… the lady holding the scales in one hand and a big sword in the other while wearing a blindfold.

    I think she needs to take her blindfold off and take a look at her hands.

    The sword is slashing randomly at the poor and unconnected and her scales are tipped over.

    However I’ll give her this… her outfit is now of the most expensive material and custom designed to appeal only to those of the greatest wealth and most influential breeding.

  2. skippy

    Just another day at the office for your publicly elected officials.

    Skippy…where ever it says PEOPLE in the Constitution (State or Federal, just substitute the word fraud…there fixed.

  3. profoundlogic

    Kudos to Blomberg for doing the right thing. Carl Seel should be held accountable to the citizens of Arizona, particularly the people of Arizona whose rights have been trampled by rampant forclosure and servicer abuses.

    Simply stunning!

  4. Greg Browman

    The website is Mandelman Matters by Martin Mandelman not Andelman. I just thought that should be corrected.

  5. Paul Tioxon

    You can not begin to describe the institutional resistance to reason, dialogue or civil communication in regards to Ocwen. Their reputation precedes them in the mortgage business for any processor, closing agent or loan officer trying to clear the most simple of stips, like getting a payoff with per diem and wire transfer fees and instructions. A loan mod, a forbearance agreement, a short sale, are you fucking KIDDING ME! They take no prisoners. Unless it’s a utility player with favors to be named later.

  6. CaitlinG

    The other piece of this story is that the bill’s original author, Michele Reagan, had been involved in a lawsuit with her servicer, Colonial Savings – a lawsuit that was settled with prejudice on, as reported at 4closurefraud, the same day that SB 1259 was “disappeared.”

    AS best I can tell, below is the sequence of events which I presented to Elizabeth Erwin, a reporter at KHPO – CBS 5 Phoenix – who covered some of the story but missed the essential links that seem to indicate bribery. Her response was, essentially, that she had asked the relevant questions and that there didn’t seem to be a problem.

    Are the servicers really smart and coordinated enough to go after multiple legislators to kill bills that are detrimental to the banking industry? Given how they run their businesses I can’t believe they have their acts that together. Is someone helping to coordinate efforts? Weird.

    E-mail sent to Elizabeth Erwin on 4/26:

    Dear Ms. Erwin –

    Kudos to you for covering the sleight of hand involved in wiping out the foreclosure transparency provisions initially included in Bill SB 1259 and their replacement by a fire districting measure.

    Unfortunately, you seem to have missed the big story here. Michele Reagan initialy introduced the bill in early 2010 when she was involved in a conflict with her mortgage lender. According to Michele, she had simply asked Colonial Savings to produce the note on her home, i.e., to provide proof that Colonial was, indeed, the organization to whom she owed the mortgage. In seeming punishment for this inquiry, she was immediately sued by Colonial Savings, even though she was current on her payments, as reported by your co-worker, Sarah Buduson:

    Around that time, Ms. Reagan filed SB 1259, not just in response to her own conflict, of course, but to protect the good people of Arizona from also being treated so badly by out of control mortgage lenders and servicers:

    The bill was passed by an overwhelming majority in the State Senate then went to the House for approval. Just before the bill was to be voted on, it was disappeared and replaced with a completely different bill, under the same filing number:

    Up to now it looks like just another in a long series of sad cases of the banksters manipulating legislation to support their fraud. But, as reported at, it’s more interesting than that. Ms. Reagan’s lawsuit was settled the VERY SAME DAY that the bill was ‘amended’ and Colonial’s suit against her was dismissed WITH PREJUDICE just three days later:

    There are just a few questions enquiring minds might have for Ms. Reagan:

    1. Did she have any communication with Rep. McLain expressing her desire to amend the bill?

    2. Did Colonial, its representatives or other entities associated with the banking/financial industry have communication with Ms. Reagan concerning the bill? Concerning her lawsuit? What were the contents of those communications?

    3. What does the settlement with Colonial entail?

    4. Did she receive a modification of terms or principle from Colonial? Were there amounts past due owed on her mortgage? What happened to past due amounts owed on the mortgage, if any?

    5. What is her explanation for the timing of the bill amendment and her settlement?

    6. How did she obtain a dismissal with prejudice which is very rare in these instances?

    7. Given the overwhelming passage of this bill in the Senate, how did Ms. Reagan determine that “the bill didn’t have a shot” in the House?

    8. Does Ms. Reagan understand that the timing of these actions might cause voters to believe that this was this a quid pro quo?

    Thank you for your good work, Ms. Erwin. I look forward to more reporting on this important subject.

  7. Patrick

    As a long term AZ resident nothing surprises me when it comes to our legislature.

    My take on this affair is that Seel probably never intended to do anything. He was merely using the threat to get the loan modified. They used to call this ploy a “fetcher bill”, as it aimed at fetching the lobbyist to your office to “resolve” your issue.

    What is unusual is that he was dumb enough to have both a paper trail and a witness. But intelligence has never been a prerequisite for being elected in AZ; most of our voters view it with suspicion.

  8. john

    Just what do you suppose it would take to make this “fit to print”? Lord, I just can’t wait for the print oligopoly to wither on the vine and die.

  9. F. Beard

    “In you they have taken bribes to shed blood; you have taken interest and profits, and you have injured your neighbors for gain by oppression, and you have forgotten Me,” declares the Lord GOD.

    “Behold, then, I smite My hand at your dishonest gain which you have acquired and at the bloodshed which is among you.”

    “Can your heart endure, or can your hands be strong in the days that I will deal with you? I, the LORD, have spoken and will act.” Ezekiel 22:12-14 (New American Standard Bible)

    And He did.

  10. plschwartz

    I wonder whether this matter can be looked into at a Federal level.
    Of course Obama’s DOJ would have to get involved

    1. VCD

      Darryl Issa is in the process of investigating ‘Friends of Angelo’ at the Fed level. This issue should be sent Tom Horne (AZ’s AG) for investigation. Does the scale of justice still mean anything? …. The jury is still out. Frankly, the silence from the AG’s office is deafening. If all else fails, mainstream media needs to step up the pressure, just as 60-Minutes was instrumental in bringing the robo-signing fiasco into the forefront of mainstream’s consciousness.

  11. watercarrier4diogenes


    Since you were at Firedoglake today, you might be acquainted with bmaz, a lawyer of some note who lives there and fills in for Marcy Wheeler quite ably.

    Might he know someone who can light a fire under an ethics investigation? Is there a chance he might be acquainted with Elizabeth Erwin, the reporter CaitlinG sent her very informative email to on 4/26?

    1. Yves Smith Post author

      Thanks for the suggestion. I can ping him via Marcy (she and I correspond upon occasion).

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