US Foreclosure risk on rise, analysts say

The Mortgage Bankers Association said yesterday that 8.4 percent of homeowners missed at least one mortgage payment in the April-June quarter.

That figure rose 0.12 percentage point from the January-March period.

In a normal market, the percentage of delinquent borrowers is about 1.1 percent, according to the trade group.

Delinquent mortgages have plummeted from a record high of more than 10 percent of residential mortgages a year ago.

But the decline is due partly to delays in foreclosure filings that are backlogged in state courts, including in Florida, New Jersey, Illinois, and New York.

The end of a state and federal investigation into faulty foreclosure paperwork will probably lead to more foreclosures later this year.

Analysts say the increase is especially worrisome because it is due mainly to high unemployment, which tends to raise the number of missed payments and foreclosures over time.

Once delayed foreclosures are restarted, the economy could suffer a hit.

“The current processing delays mean this will not happen quickly, underlining our view that both the housing market and the economy will remain weak for a few years,’’ said Paul Dales, senior US economist at Capital Economics.

Can You Discharge Student Loans in Bankruptcy?

Can You Discharge Student Loans in Bankruptcy?

Question:  I have student loans from 15 years ago.  I have been paying them back slowly, but I recently lost my job and am struggling to keep current on my payments. I am 55 years old and am having trouble finding another job. I am thinking of filing for Chapter 7 bankruptcy to get rid of other debts. Can I get rid of the student loans in bankruptcy?

Answer: Student loans are rarely discharged in bankruptcy.  But given your age and payment history, you might be able to get a court to discharge yours. Here’s how the law works.

Generally, in order to have student loans discharged in Chapter 7 bankruptcy, you must show that continued payment would cause you “undue hardship.” Most courts determine if you have met the undue hardship standard by applying what is called the Brunner Test. The Brunner Test consists of these three factors:

• Based upon your current income and expenses, you cannot maintain a minimal standard of living for yourself and your dependents if you are forced to repay your loans.
• Your current financial situation is likely to continue for a big part of the repayment period.
• You  have made a good faith effort to repay your student loans.

Courts are very reluctant to wipe out student loans in bankruptcy, and rarely find that debtors have met the Brunner Test (or any other test the court may use). However, they are more likely to discharge student loans if you are over 50, will probably remain poor or with very low income for the remainder of your working years, and have demonstrated an effort to pay off your loans.

In certain situations, you may be one of the lucky few able to discharge student loans in bankruptcy. Sometimes different bankruptcy judges treat treat student loans different than the next judge. So its important to check decisions in your area.

And keep in mind that there may be other ways to handle your student loan payments, from reducing payments to possibly even cancelling them. 

No criminal charges against WaMu: 'Revolution, anyone?'

It was the biggest bank failure in U.S. history, and the announcement by the U.S. Attorney's office in Seattle that no criminal charges will be filed against former executives of Washington Mutual generated a good head of righteous steam over the weekend.

"This is an outrage! Revolution, anyone?" one commentator wrote the Seattle Times, while another complained: "So the regular Joe makes a mistake and gets his hand cut off, but if the big kingsmen make a mistake, nothing happens."

A brief statement by U.S. Atty. Jenny A. Durkan's office Friday said that a federal task force looking into the September 2008 failure, which followed years of high-risk loans in the midst of the nation's increasingly tenuous housing bubble, found no evidence of prosecutable criminal wrongdoing -- however dubious the management seemed to the thousands of investors who lost their shirts.

"Investigators have conducted an extensive investigation that included hundreds of interviews and the review of millions of documents relating to the operations, and the subsequent failure, of Washington Mutual Bank," the Justice Department statement said. "Based upon its investigation, the Department of Justice has concluded that the evidence does not meet the exacting standards for criminal charges in connection with the bank’s failure."

The department is cooperating with the Federal Depositors Insurance Corp. in a lawsuit against three former executives of the bank alleging gross negligence and breach of fiduciary duty, the statement said.

Those would be the executives who were still earning millions of dollars as the bank plummeted toward insolvency, issuing risky subprime mortgages, often based, according to the bank's own internal audits, on fraudulent documents. Former WaMu chairman Kerry Killinger earned $65.9 million in compensation during the nearly four years before the bank's failure, the FDIC said in its suit, which targets Killinger and two other former WaMu executives, former president Stephen J. Rotella and ex-loan executive David Schneider. The top managers have strongly denied any wrongdoing.

The Seattle Times in an editorial earlier this year already made it clear there was little sympathy for the executives' protests that the bank had been well-managed: "When Rotella ... answers a federal lawsuit by calling himself 'an effective, hardworking bank manager,' and Killinger, the former CEO, answers the same lawsuit by saying he 'responsibly and consistently served the interests of its depositors, customers and shareholders,' our sympathy shrivels to the size of a raisin," the editorial board said.

Over the weekend, there were similar protests. "The bottom line: Large-scale white collar crime goes unpunished in America, except for out-and-out Ponzi schemes," Seattle PI.com columnist Joel Connelly proclaimed.

"Who, I ask, has gone to jail among those who issued reckless and fraudulent loans that triggered the housing crisis?" he said. "I can't help but wonder whether the failure to go after architects of this bank failure is itself rooted in a fear of failure."

How and When to Reopen a Bankruptcy Case

Sometimes people want to reopen a closed bankruptcy case because they failed to invoke important procedures while their bankruptcy case was open.

Fortunately it's usually possible to reopen the bankruptcy and play catch-up. Common reasons for wanting to reopen a bankruptcy case include:

• failing to timely file an Official Form 23 (pre-discharge counseling certification)
• failing to name an important creditor or list valuable property, or
• failing to take necessary steps to remove a judgment lien from real estate.

The process for reopening a bankruptcy case involves two steps.

Step One: Ex Parte Motion to Reopen. The first step is what's known as an ex-parte motion to reopen the case. This is a request to the judge that the case be reopened without giving advance notice to the creditors or scheduling a hearing. The paperwork consists of the motion or request, and an order granting the request. 

Step Two: Request for the Desired Action. The second step is to request (by motion and order) that the judge allow the desired action, for instance the removal of a judicial lien on real estate, or the entry of an order of discharge.

The fee for reopening a bankruptcy case is $274, so it's obviously less expensive to get everything done while you case is open. However, if you are trying to remove a lien worth many thousands of dollars, or asking for a discharge an expensive student loan, the fee to reopen the case is relatively unimportant.

Lawmakers call for hearings on robo-signing

NEW YORK (AP) -- Lawmakers and enforcement agencies called for hearings and further investigation Tuesday after learning that the illegal practice known as robo-signing has continued in the mortgage industry.

The Associated Press reported on Monday that county officials in at least three states - Massachusetts, North Carolina and Michigan - say they have received thousands of mortgage documents with questionable signatures since last fall. That's when forged signatures and false affidavits - also called robo-signing - led to a temporary halt to foreclosures. Banks and mortgage processers promised to stop the practice. But the findings of the county officials indicate that robo-signing is still a widespread problem.

Sen. Sherrod Brown, D-Ohio., chair of the Financial Institutions and Consumer Protection Subcommittee, said the subcommittee will hold a hearing on the robo-signing issue.

"Wall Street and some in Washington want us to believe that robo-signing is a thing of the past," said Brown. "But the same risky practices that put our economy on the brink of collapse continue to infect the housing market."

Rep. Maxine Waters, D-Calif., a senior member of the House Committee on Financial Services said the lenders who continue the practice "need to be investigated and prosecuted." She told The Associated Press that she believed regulators should step in and that the absence of stronger regulation is "the reason why the system broke down in the first place." She said the county officials' findings show lenders will not stop practices like robo-signing on their own.

"(The lenders) have complete disregard for the damage they have already caused and have no intention of changing their ways," said Waters, who also called for more hearings on the issue.

County officials who are responsible for keeping land records, including property deeds, say that they have received thousands of robo-signed documents filed in their offices since October.

In Essex County, Mass., the office that handles property deeds has received almost 1,300 documents since October with the signature of "Linda Green," but in 22 different handwriting styles and with many different titles.

In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30. And in Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Associates.

Early Tuesday, an official from the office of Minnesota attorney general, Lori Swanson, contacted the Essex County's John O'Brien to get more information for its own investigation into robo-signing. The Massachusetts attorney general's office also confirmed that it is meeting with several of the state's 21 registers of deeds to assess the extent of robo-signing in the state.

Also on Tuesday, nine recorders of deeds in Illinois held a press conference to say they will assist the state's attorney general Lisa Madigan who is investigating robo-signing in her state.

Rep. Waters, meanwhile, says the Office of the Comptroller of the Currency, or the OCC, is the main federal regulator for banks. As such, it's the OCC's responsibility to investigate the banks.

The OCC has been criticized by lawmakers and consumer advocates for going easy on banks in the past. The same criticism has resurfaced since the robo-signing scandal broke in September. Last fall, The Associated Press found that robo-signed documents led to banks wrongfully foreclosing on people who had paid their mortgages in full. When asked about the issue, an OCC spokesman flatly denied that any such thing had ever occurred.

The OCC partnered with other federal regulators and conducted a review of bank procedures including robo-signing in December. In April, the 14 largest national banks entered into a consent decree with the OCC in which they vowed to submit action plans as to how they would address such systemic issues as robo-signing.

Last week, the banks delivered those action plans to the OCC, which is now reviewing them, a spokesman said.

Robo Signing Run Rampart in Credit Card Collection and Debt Collection

The One Hundred Billion Dollar Problem in Small Claims Court: Robo-Signing and Lack of Proof in Debt Buyer Cases

A new industry which has clogged the dockets of small claims courts throughout the country is on the rise. It is known as the "debt buyer" industry. Members of this $100 billion per year industry exist for no reason other than to purchase consumer debt which others have already deemed uncollectable, and then try to succeed in collecting where others have failed. Debt buyers pay pennies on the dollar for this charged off debt, and then seek to collect, through hundreds of thousands of lawsuits, the full face value of the debt. The emergence and vitality of this industry presents several legal, ethical and economic issues which merit exploration, study and scholarly debate.

The problem of robo-signing and the lack of proof is prevalent in debt buyer cases. Although this problem has received limited attention from the media and from regulators, there is a paucity of legal scholarship about debt buyers in general, and this problem in particular. This article demonstrates that robo-signing and fraud are rampant in this industry, and that the debt buyers who pursue these claims often lack proof necessary to show that they own the debt, and often lack proof even that a debt was ever owed in the first place. The fact that this lack of proof has led to consumers being sued twice on the same debt demonstrates the due process concerns which are implicated when courts enter judgments against consumers based on robo-signing and insufficient proof.

Courts must be called upon to hold plaintiffs in debt buyer cases to the same standards required of other litigants. Courts must require a demonstration of personal knowledge of the matter at issue before any affidavit is accepted, before any person testifies, and before any documents are admitted into evidence.

Robo Signing Continues

Mortgage 'Robo-Signing' Continues In Mass., Across The Nation

Associated Press

Mortgage industry employees are still signing documents they haven't read and using fake signatures more than eight months after big banks and mortgage companies promised to stop the illegal practices that led to a nationwide halt of home foreclosures.

County officials in at least three states say they have received thousands of mortgage documents with questionable signatures since last fall, suggesting that the practices, known collectively as "robo-signing," remain widespread in the industry.

The documents have come from several companies that process mortgage paperwork, and have been filed on behalf of several major banks. One name, "Linda Green," was signed almost two dozen different ways.

Lenders say they are working with regulators to fix the problem but cannot explain why it has persisted.

Last fall, the nation's largest banks and mortgage lenders, including JPMorgan Chase, Wells Fargo, Bank of America and an arm of Goldman Sachs, suspended foreclosures while they investigated how corners were cut to keep pace with the crush of foreclosure paperwork.

Critics say the new findings point to a systemic problem with the paperwork involved in home mortgages and titles. And they say it shows that banks and mortgage processors haven't acted aggressively enough to put an end to widespread document fraud in the mortgage industry.

"Robo-signing is not even close to over," said Curtis Hertel, the recorder of deeds in Ingham County, Mich., which includes Lansing. "It's still an epidemic."

In Essex County, the office that handles property deeds has received almost 1,300 documents since October with the signature of "Linda Green," but in 22 different handwriting styles and with many different titles.

Linda Green worked for a company called DocX that processed mortgage paperwork and was shut down in the spring of 2010. County officials say they believe Green hasn't worked in the industry since. Why her signature remains in use is not clear.

"My office is a crime scene," said John O'Brien, the registrar of deeds in Essex County.

In Guilford County, N.C., the office that records deeds says it received 456 documents with suspect signatures from Oct. 1, 2010, through June 30. The documents, mortgage assignments and certificates of satisfaction, transfer loans from one bank to another or certify a loan has been paid off.

Suspect signatures on the paperwork include 290 signed by Bryan Bly and 155 by Crystal Moore. In the mortgage investigations last fall, both admitted signing their names to mortgage documents without having read them. Neither was charged with a crime.

And in Michigan, a fraud investigator who works on behalf of homeowners says he has uncovered documents filed this year bearing the purported signature of Marshall Isaacs, an attorney with foreclosure law firm Orlans Assoc. Isaacs' name did not come up in last year's investigations, but county officials across Michigan believe his name is being robo-signed.

O'Brien caused a stir in June at a national convention of county clerks by presenting his findings and encouraging his counterparts to investigate continued robo-signing.

The nation's foreclosure machine almost came to a standstill when the nation's largest banks suspended foreclosures last fall. Part of the problem, banks contended, was that foreclosures became so rampant in 2009 and 2010 that they were overwhelmed with paperwork.

The banks reviewed thousands of foreclosure filings, and where they found problems, they submitted new paperwork to courts handling the cases, with signatures they said were valid. The banks slowly started to resume foreclosures this winter and spring.

The 14 biggest banks nationwide reached a settlement with federal regulators in April in which they promised to clean up their mistakes and pay restitution to homeowners who had been wrongly foreclosed upon. The full amount of the settlement has not been determined. But it will not involve independent mortgage processing firms, the companies that some banks use to handle and file paperwork for mortgages.

So far, no individuals, lenders or paperwork processors have been charged with a crime over the robo-signed signatures found on documents last year. Critics such as April Charney, a Florida homeowner and defense lawyer, called the settlement a farce because no real punishment was meted out, making it easy for lenders and mortgage processors to continue the practice of robo-signing.

Robo-signing refers to a variety of practices. It can mean a qualified executive in the mortgage industry signs a mortgage affidavit document without verifying the information. It can mean someone forges an executive's signature, or a lower-level employee signs his or her own name with a fake title. It can mean failing to comply with notary procedures. In all of these cases, robo-signing involves people signing documents and swearing to their accuracy without verifying any of the information.

Most of the tainted mortgage documents in question last fall were related to homes in foreclosure. But much of the suspect paperwork that has been filed since then is for refinancing or for new purchases by people who are in good standing in the eyes of the bank. In addition, foreclosures are down 30 percent this year from last. Home sales have also fallen. So the new suspect documents come at a time when much less paperwork is streaming through the nation's mortgage machinery.

None of the almost 1,300 suspect Linda Green-signed documents from O'Brien's office, for example, involve foreclosures. And Jeff Thigpen, the register of deeds in North Carolina's Guilford County, said fewer than 40 of the 456 suspect documents filed to his office since October involved foreclosures.

Banks and their partner firms file mortgage documents with county deeds offices to prove that there are no liens on a property, that the bank owns a mortgage or that a bank filing for foreclosure has the authority to do so.

The signature of a qualified bank or mortgage official on these legal documents is supposed to guarantee that this information is accurate. The paper trail ensures a legal chain of title on a property and has been the backbone of U.S. property ownership for more than 300 years.

The county officials say the problem could be even worse than what they're reporting. That's because they are working off lists of known robo-signed names, such as Linda Green and Crystal Moore, that were identified during the investigation that began last fall. Officials suspect that other names on documents they have received since then are also robo-signed.

It is a federal crime to sign someone else's name to a legal document. It is also illegal to sign your name to an affidavit if you have not verified the information you're swearing to. Both are punishable by prison.

In Michigan, the attorney general took the rare step in June of filing criminal subpoenas to out-of-state mortgage processing companies after 23 county registers of deeds filed a criminal complaint with his office over robo-signed documents they say they have received. New York Attorney General Eric Schneiderman's office has said it is conducting a banking probe that could lead to criminal charges against financial executives. The attorneys general of Delaware, California and Illinois are conducting their own probes.

The legal issues are grave, deeds officials across the country say. At worst, legal experts say, the document debacle has opened the property system to legal liability well beyond the nation's foreclosure crisis. So someone buying a home and trying to obtain title insurance might be delayed or denied if robo-signed documents turn up in the property's history. That's because forged signatures call into question who owns mortgages and the properties they are attached to.

"The banks have completely screwed up property records," said L. Randall Wray, an economics professor and senior scholar at the University of Missouri-Kansas City.

In the Massachusetts case, The Associated Press tried to reach Linda Green, whose name was purportedly signed 1,300 times since October. The AP, using a phone number provided by lawyers who have been investigating the documents since last year, reached a person who said she was Linda Green, but not the Linda Green involved in the mortgage investigation.

In the Michigan case, a lawyer for the Orlans Assoc. law firm, where Isaacs works, denies that Isaacs or the firm has done anything wrong. "People have signatures that change," said Terry Cramer, general counsel for the firm. "We do not engage in 'robo-signing' at Orlans."

To combat the stream of suspect filings, O'Brien and Jeff Thigpen, the register of deeds in North Carolina's Guilford County, stopped accepting questionable paperwork June 7. They said they had no choice after complaining to federal and state authorities for months without getting anywhere.

Since then, O'Brien has received nine documents from Bank of America purportedly signed by Linda Burton, another name on authorities' list of known robo-signers. For years, his office has regularly received documents signed with Burton's name but written in such vastly different handwriting that two forensic investigators say it's highly unlikely it all came from the same person.

O'Brien returned the nine Burton documents to Bank of America in mid-June. He told the bank he would not file them unless the bank signed an affidavit certifying the signature and accepting responsibility if the title was called into question down the road. Instead, Bank of America sent new documents with new signatures and new notaries.

A Bank of America spokesman says Burton is an assistant vice president with a subsidiary, ReconTrust. That company handles mortgage paperwork processing for Bank of America.

"She signed the documents on behalf of the bank," spokesman Richard Simon said. The bank said providing the affidavit O'Brien asked for would have been costly and time-consuming. Instead, Simon says Bank of America sent a new set of documents "signed by an authorized associate who Mr. O'Brien wasn't challenging."

The bank didn't respond to questions about why Burton's name has been signed in different ways or why her signature appeared on documents that investigators in at least two states have deemed invalid.

Several attempts by the AP to reach Burton at ReconTrust were unsuccessful.

O'Brien says the bank's actions show "consciousness of guilt." Earlier this year, he hired Marie McDonnell, a mortgage fraud investigator and forensic document analyst, to verify his suspicions about Burton's and other names on suspect paperwork.

She compared valid copies of Burton's signature with the documents O'Brien had received in 2008, 2009 and 2010 and found that Burton's name was fraudulently signed on hundreds of documents.

Most of the documents reviewed by McDonnell were mortgage discharges, which are issued when a home changes hands or is refinanced by a new lender and are supposed to confirm that the previous mortgage has been paid off. Bank of America declined comment on McDonnell's findings.

In Michigan, recorder of deeds Hertel and his counterparts in 23 other counties found numerous suspect signatures on documents filed since the beginning of the year.

In June, their findings led the Michigan attorney general to issue criminal subpoenas to several firms that process mortgages for banks, including Lender Processing Services, the parent company of DocX, where Linda Green worked. On July 6, the CEO of that company, which is also under investigation by the Florida Attorney General's office, resigned, citing health reasons.