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Introduction to Mortgage Servicing Fraud

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From www.msfraud.org ~

• These are not "predatory lenders." These companies do not loan money. They operate in the lending industry after-the-fact. They take on a function that a lender doesn’t want - the backroom functions of handling payments, escrow accounts, annual statements, dealing with borrowers, collections, etc. The perpetrators of the loan servicing scam acquire the servicing rights to loans that other companies have already made. (Loans that were deliberately constructed by predatory lenders are ideal for processing

through servicers that specialize in aggressive collections or rapid foreclosure processing, but the loan servicing scam can be operated against any mortgage loan if the servicer acquires the rights from the lender.)

• These scams are designed and deliberately operated. These situations are not errors, mistakes or situations where a servicer’s managers or employees failed to do their job. Their systems are well-designed and state-of-the-art in terms of analytical technology that helps them choose and process their victims. These scams generate enormous profits from a business that is difficult to run, people and litigation

intensive and normally only marginally profitable. Many have failed and been acquired (Fairbanks bought several).

• You, the borrower are not their customer. Lending companies and investors are their customers. As a borrower being "serviced" in the scam, you are simply one of millions in an ever-growing pool of what the financial services industry deliberately labels as "sub-prime" borrowers waiting to be taken advantage of.

• They have almost unlimited legal resources. If you had the financial resources to have effective legal representation and the documentation to challenge them, they would turn their attention to easier targets. Of course, because most sub-prime borrowers are not well off and don’t have an attorney, you’re a likely target.

• They have leverage and information and will prey on your fears. The fear of possibly losing your home is the key that unlocks your bank account for them. They know almost everything about you financially and even from an employment and income basis. They are made aware of your inquiries into other lenders about refinancing even without a request for a payoff and that shopping may lead them to target you before you can get out of the loan you’re in.

• They are experts with millions of successful cases behind them. The loan servicing industry, including those who founded and are running the servicing scam companies, helped craft the "standard" loan documents in widespread use. They are written entirely for the protection of the lending industry, not the consumer. That situation allows them to manipulate their processes and procedures to push you into a position where they can take funds from you or ultimately take your home, often within the terms and conditions of the loan. Some do go beyond the terms or even break the law and aren’t stopped because the

borrower does not actually understand the agreement they signed or the laws and regulations.

The path toward losing your home to this scam is actually quite simple. The first phase is designed to fabricate the default, and typically begins with one, or a combination of ways to arm the servicer's records with false data:

1) When the servicer decides to manipulate the date the payment is received in order to artificially create a late payment.

2) When the servicer applies part of the payment to something other than principal and interest and creates a partial late payment or deficiency.

3) When the servicer decides to "force place" an insurance policy on the property by claiming the homeowner has not provided proof of insurance.

4) When the servicer pays your property taxes late, then adds their late penalty to your account without your knowledge.

Any or all of those processes result in at least one month of the account being past due and a negative note is made in the credit report (which effectively prevents the borrower from refinancing). It also helps the Private Mortgage Insurance carrier keep the policy in effect on the loan, which is why these insurance companies have investments in servicing companies in the first place – a late payment or two allows the lender to keep the insurance in force.

IF the borrower has anything more than about 10-15% equity in the property, it is to the servicer’s advantage at this point to not aggressively attempt to collect. In fact, if the borrower makes contact, the servicer will engage in delay tactics to avoid resolving the problem in time to prevent default. If the equity position is considerably less than 10%, the servicer does not have as much leverage, nor is the opportunity as great and they will typically be more aggressive in collection efforts and more willing to keep the loan in

force.

In the case of force-placed insurance, it is to the servicer’s advantage to ignore the borrower and any proof of insurance as long as possible, again to keep the borrower’s credit status in a negative light and to maintain their relationship with the insurer they contract with. These policies are extremely profitable because they provide absolutely no coverage for the homeowner. They protect ONLY the value of the loan if the property is destroyed.

If the servicer has analyzed the opportunity and marked the property for default and recovery, the next payment received will be rejected as being insufficient. If it is accepted, the application of the funds leaves the loan sixty days past due. Typically, the scam now moves toward formal legal notice of acceleration in order to coerce the borrower into signing a highly-profitable forbearance agreement to somehow "save the home." The servicer rolls thousands of dollars in penalties and an incomprehensible combination of

legitimate and illegitimate fees into the agreement and the homeowner is left with no

choice but to sign it or lose their home. The amount demanded will be calculated to take as much of the homeowner’s equity as possible.

If the homeowner decides to sell the property to get out of the situation and take their equity, they will find the payoff amount (which in the last month of the scam will take longer to get than the amount of time left before foreclosure) strips them of their equity. That combined with their artificially-damaged credit rating helps keep the victim trapped.

If the borrower cannot pay the amounts demanded in the forbearance agreement, the servicer will have one of their network of specialized attorney firms foreclose and the property will be sold, typically at a county auction or through their real-estate network.

If the borrower signs the agreement, they will soon be recycled through the process with yet more late payments and fees. But in the terms of the forbearance agreement, they may find they have signed away any legal protections they may have already had, including the right to sue the servicer for fraud or misrepresentation.

In the end, if the homeowner cannot afford competent legal representation to stop this fraud, they lose their equity and in many cases, their home.

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Thank you.

It's almost unbelievable, until you see how all of the dots connect.

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Great post here... I've been a long time pro-ponent of msfraud.org. In the beginning of my mortgage career I started out thinking the individuals who were going over their stories there were just being lazy, but after some of my former clients, and even myself, had troubles with my mortgage servicer I know this is a profit generating industry in itself. While quite a bit of the "fraud" can be avoided by always making payments on time, mortgage servicers still need to play by the rules.

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Is there a list of "Servicers" we need to watch out for? (besides Litton)

And is there any legal recourse to prevent our lender from sending our account to a servicing company?

edit: I see that huge list of Servicers on the msfraud page. It doesn't really mark any of them as better or worse than others though.

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Is there a list of "Servicers" we need to watch out for? (besides Litton)
I know the list at msfraud.org is pretty vague, however if you read more posts there, you'll see a trend in some names of servicers popping up more frequently than others. If in doubt, Google the servicer, check ripoffreport.com and the BBB. I even found a ton of info. on Litton at the FTC. The information is all there, it just amazes me that this story hasn't broken wide open yet.
And is there any legal recourse to prevent our lender from sending our account to a servicing company?
No, unfortunately not. Our loan was transferred to Litton after foreclosure had begun. I Googled them, thinking "who buys a loan in foreclosure?!" and saw the horror stories then. We survived under them since April '06 and now intend to jump ship before it sinks.

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From www.msfraud.org ~

1) When the servicer decides to manipulate the date the payment is received in order to artificially create a late payment.

2) When the servicer applies part of the payment to something other than principal and interest and creates a partial late payment or deficiency.

3) When the servicer decides to "force place" an insurance policy on the property by claiming the homeowner has not provided proof of insurance.

Excellent. This is the same scam that some auto loan companies, like Roadloans (Triad financial,) are up to.

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I unfortunately have to post here because I had a bad situation arise. The situation is that the servicer and the bank are colluding to engineer a default on my mortgage. First the servicer sent a notice of default and then the same day my bank engineered a series of overdraft that depleted the funds in the account to make it impossible to make the payment for the mortgage.

 

They have done the constant 30 day late thing already so I took the following actons:

 

1. Wrote a formal letter disputing the Notice of Default.

2. Formally in writing disputed every overdraft and NSF charge.

 

Is there any actions I should be taking further to prevent this?

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I unfortunately have to post here because I had a bad situation arise. The situation is that the servicer and the bank are colluding to engineer a default on my mortgage. First the servicer sent a notice of default and then the same day my bank engineered a series of overdraft that depleted the funds in the account to make it impossible to make the payment for the mortgage.

 

They have done the constant 30 day late thing already so I took the following actons:

 

1. Wrote a formal letter disputing the Notice of Default.

2. Formally in writing disputed every overdraft and NSF charge.

 

Is there any actions I should be taking further to prevent this?

@Seadragon - the only thing I would suggest is get an attorney.  Someone must be practicing in this arena in CA.  

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@Seadragon - the only thing I would suggest is get an attorney.  Someone must be practicing in this arena in CA.  

I am most definitely looking into this because this is not something I would trust in pro per, Even though I know a lot I need the attorney to really stick it to them. Even better I have switched banks to deny the servicer the ability to collude with the other bank to engineer the default by manipulating the money.

 

I will look into attorneys who have won in this area.

 

@admin Thank you for providing a place where these issues can be dragged into the middle of the floor and be clubbed properly. You are a true heroine: Definition

1
a : a mythological or legendary woman having the qualities of a hero
 
b : a woman admired and emulated for her achievements and qualities
2
a : the principal female character in a literary or dramatic work
 

b : the central female figure in an event or period

 

All apply in this instance.

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UPDATE! now my FORMER bank reversed a lot of the overdrafts it is because when they overdrafted me they used a high to low ordering but they started to use low to high ordering a week prior. I brought that to their attention and opened accounts with another bank.

 

Now first, I am a class member of the overdraft settlement. I am pissed because I had to jump through some serious hurdles to block them from taking my house. The letters help chill them out. I had to do some extra side work and when they couldn't get the default, then they are all about trying to cover themselves.

 

The whole ordeal sucks because unless you keep careful track of ALL your financial transactions, the financial industry will strip you of you cash and equity.

In my case I was fortunate to have caught it early and resolved to fight hard early on.

 

So as a penalty I changed my bank away from the servicer of my mortgage. I feel that separating the financials away from the mortgage servicer will cutdown on the fraud. You see the banks don't play nice with each other.

 

I recommend others move away from banking with your mortgage servicer, this would prevent an engineered default. it is best to keep your accounts for your house and paycheck separate.

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Update: The servicer has disappeared an entire mortgage payment but after many months now have the concrete evidence to show that we are in fact current and they have engaged in illegal practices. Unfortunately I have been unable to find even one lawyer to take this up. Any ideas?

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@Seadragon

Update: The servicer has disappeared an entire mortgage payment but after many months now have the concrete evidence to show that we are in fact current and they have engaged in illegal practices. Unfortunately I have been unable to find even one lawyer to take this up. Any ideas?

Sounds like typical behavior by the foreclosure machine.

 

If a servicer won't listen to reason, perhaps the CFPB's new 106 page 2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules  "... which are set to take effect on January 10, 2014." may provides some new tools to assist in getting their attention.

 

pg. 56 The new error resolution and information request requirements expand on (and encompass) the existing qualified written request (QWR) requirements.

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@Seadragon

Sounds like typical behavior by the foreclosure machine.

 

If a servicer won't listen to reason, perhaps the CFPB's new 106 page 2013 Real Estate Settlement Procedures Act (Regulation X) and Truth in Lending Act (Regulation Z) Mortgage Servicing Final Rules  "... which are set to take effect on January 10, 2014." may provides some new tools to assist in getting their attention.

 

pg. 56 The new error resolution and information request requirements expand on (and encompass) the existing qualified written request (QWR) requirements.

Man that is a good Christmas present. Thnx :)

 

I got them this time by writing a letter to ACH and verifying a payment transfer. The bank has records but servicer states no payment. this is major because it is over 1000 dollars= felony=they better watch their cornhole.

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Sue them for fraud... you made the payment, they "lost" it and I'm sure they are probably going to incorrectly report you as late on the CR. 

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The bank closed the account which makes it impossible to get documents from them, BUT I was smart and when the trouble started I downloaded all account statements, payment records, and account activity. So I have all the documents. I consulted a lawyer and he said that I have already sent the documents and letters he would have sent, that getting the records before the bank can lose them and getting the appropriate government agencies and attorney general involved will be a smart thing. 

 

So make sure you get all the documents you can at the first sign of trouble download them as PDF'S and any other forms available and burn them to cd-r.

 

in my case recognizing that the bank and servicer were doing this right when it happened is directly because I read this thread. Thank all of you. I will keep you posted on events.

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Hello Forum,

HELP!!!

I am a Texas resident and Homestead Property owner involved in a Pro Se "unconscionable contract" dispute with Nationstar Mortgage.

My original petition is attached.  

Nationstar is a "Debt Collection" agency/service provider for Freddie Mac.  

The defendant Nationstar has sent an open letter of "General Denial" to my claim stating:

1) Defendant asserts statue of limitations.

2) Plaintiff has failed to name all necessary parties.

3) Plaintiffs complaint alleges damages that are the result of acts or omissions committed by non-parties to this action over whom the Defendant has no responsibility or control.

4)  Plaintiff failed to state a legal basis for his claim. 

My questions/comments are as follows:

1) I am WAY out of my league as a Pro se litigant.  My experience level in life has not prepared me to fight a giant like Freddie Mac & Nationstar Mortgage but I have lost everything in my pursuit of an equitable judgement and this is my final hope.

2) What do I do?  In responding to the 4 points listed above I can only provide these statements for your help & consideration on how I might go about defending my home.

Point 1:  Defendant asserts statue of limitations:  Taylor Bean & Whitaker were my original mortgage "Note" holders and the FBI put them into force receivership when they raided their offices in 2012 and put several of the executive directors in jail for mortgage lending fraud.  FreddieMac transferred my "Note" to Cenlar just 3 short weeks before the FBI raid.  Cenlar as the second service provider and in the summer of 2015 FreddieMac assigned my note to Nationstar for Debt Collection.  A final letter of denial for assistance from Nationstar was received on 01/25/2017.  I immediately filed against them with this petition.

Point 2:  Plaintiff has failed to name all necessary parties.  As I am not an attorney, i am not sure what other parties I should be filing against for "unconscionable contract" when Nationstar is the only "Note Holder."  Am I supposed to be filing against Freddiemac too?

Point 3:  Plaintiffs complaint alleges damages that are the result of acts or omissions committed by non-parties to this action over whom the Defendant has no responsibility or control.  This the big one.  Does anyone have a legal precedent in Texas that I can reference that says that all responsibility lies with the current service provider and that the current service provider inherits all previous errors and omissions?

Point 4:  Plaintiff failed to state a legal basis for his claim.   i thought I did this when i stated my claim is an "unconscionable contract."  How do I respond to this?

Angels are out there and I could really use one right now.

Can anyone help with this?

With humility, respect and overwhelming gratitude.

Chris

2017-02-07 Plaintif Original Petition - Nationstar Final - Filed.pdf

2017-02-15 Defendants General Denial.pdf

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1) Does anyone have a reference for the liability and culpability of mortgage service providers that purchase a note from the originator of the residential mortgage note?

2) Does anyone have any experience dropping a lawsuit on Freddie Mac as the lender of the note?

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Groovystuff,

 

I can appreciate your rush to get information, but it makes things easier on everyone if you keep your posts in the same thread you already started.  That way, we dont end up trying to answer the same questions multiple times and so on. 

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