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Articles Tagged with subprime mortgage

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7th Circuit Court Seal

Jepson v. Bank of New York Mellon
Court of Appeals for the 7th Circuit  Docket No. 14-2459

Opinion Date: March 22, 2016

This case is a testament to the subprime crisis and illustrates how complex and devastating mortgage securitization and pooling was to ordinary homeowners; middle-class people faced with sudden and insurmountable mortgage debt. Sadly, this decision also illustrates just how hard it is to stand up to the holders of pooled mortgage loans.

The underlying facts of the case are so common that the Plaintiff could have been anyone; while the tortuous path of the case up to the 7th Circuit – years after the underlying foreclosure and bankruptcy – left this Plaintiff financially devastated.

Factual Background

Patricia Jepson (Jepson) executed a Note and Mortgage issued by “America’s Wholesale Lender” – a d/b/a of notorious subprime mortgagee Countrywide – and Mortgage Electronics Registration Systems (MERS), its nominee. The Note was endorsed by Countrywide d/b/a America’s Wholesale Lender and transferred to CWABS, a residential mortgage trust operating under New York law that pooled loans and sells mortgage-backed securities sold on Wall Street. CWABS is governed by a Pooling and Service Agreement (PSA). Bank of New York Mellon (BNYM) was the Trustee for CWABS. MERS therefore assigned Jepson’s mortgage to BNYM.

When Jepson eventually defaulted on her mortgage – a common scenario in such subprime traps – BNYM filed a Foreclosure complaint in State Court. Jepson inturn filed Chapter 7 Bankruptcy. BNYM predictably moved to lift the Automatic Stay. But instead of lying down and letting the Bank proceed, Jepson filed an Adversary Complaint and Objection seeking a declaration that BNYM had no interest in her mortgage because, inter alia, the note did not proceed through a complete chain of intervening endorsements; was endorsed after the closing date in the PSA; and that America Wholesale Lender was a fictitious entity rendering the Note was void under Illinois law. Continue reading

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Where Did the Equity Go?

If you’re an Illinois homeowner chances are any equity you had in your home disappeared between 2008 and 2011; and hasn’t been seen since. If you’re lucky that equity may start crawling back to “normal” levels in 2013; but if you haven’t seen it happen you’re not alone. Despite recent reports in the news about recoveries in California, Arizona, and Las Vegas, Illinois property values continue to languish. Of course it’s not all bad news. For instance, as of January the overall price of housing in the Chicago area was up 3.3% from a year ago, with condo prices up a robust 5.8%. Then again, the Illinois foreclosure rate has merely leveled off rathern than falling as it has in other States. And as the “jobless recovery” grinds on, a few basic truths are coming to light:

The value of real estate is still well below pre-crash levels and many people borrowed against those inflated values. These people owe well more than their homes are worth.

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According to the best practices website maintained by the National Governors’ Association, legislators, courts, and law enforcement officials in Illinois have taken steps to deal with the mortgage mess. Whether any of them will do any good is still up in the air.

Mortgage Fraud Hotline: 800-532-8785

Governor’s Homeowner Assistance Initiative: free mortgage counseling and assistance. Use one of 2 hotlines to contact them — foreclosure prevention or mortgage fraud.

House Bill 3762 (signed by Gov. Quinn May 29, 2010): permits service members to apply for a 90-day stay of their foreclosure proceedings while they are on active duty – improving on rights afforded under Federal Service Members Civil Relief Act.

Senate Bill 1894 (signed by Gov. Quinn Dec. 31, 2009): requires that lenders provide sufficient information for the State to determine whether counseling is needed before the borrower takes on a loan. It also increases education requirements for real estate agents and expands Illinois’ anti-predatory database program to the 3 counties with the highest foreclosure rates in Illinois. This program previously applied in Cook County only.

HB 2653: allows homeowners facing foreclosure to qualify for assistance under the state’s Homelessness Prevention Act.

Outreach

The Illinois Housing Development Authority and Department of Financial and Professional Regulation have been bringing together mortgage loan providers, local housing assistance groups and state agencies in one place through Home Ownership Outreach Days to help struggling homeowners. The events cover how financing works, how foreclosure works, and how to refinance.The events also give homeowners the opportunity to meet face-to-face with lenders.

Scams

Illinois enacted the Mortgage Rescue Fraud Act (SB 2349) in June 2006.

Stabilization

Illinois enacted H.B. 621 in August 2009 to allow a township to provide for certain aspects of property maintenance after foreclosure such as yard maintenance.The bill allows the township to collect compensation from the owner for the cost of the maintenance. 

Renters

Illinois S.B. 258 signed in August 2007 provides that a tenant who is current on his or her rent must be allowed to remain in their unit for at least 120 days following notice of the foreclosure; while S.B. 2721 signed in August 2008 prevents the owner of foreclosed property from evicting tenants unless the tenants receive an eviction notice.

Other

Illinois has established a task force to determine the best way to handle the rising number of foreclosures. The Governor’s Mortgage Fraud Task Force and the Illinois Statewide Foreclosure Prevention Network proactively work to mitigate foreclosure throughout the state.

Illinois joined 11 other states as part of the State Foreclosure Prevention Working Group. The body is comprised of State Attorneys General, two State Bank Regulators, and the Conference of State Bank Supervisors.

Anti-Predatory Lending

Illinois enacted S.B. 1167 in 2007 to prohibit financing certain insurance premiums, equity stripping and loan flipping, and encouraging default. The legislation requires brokers to disclose refinancing options. The legislation also establishes a predatory lending database program. 2003 815 ILCS 137 High Risk Home Loan Act (Public Act 93-0561),

Of course this is only a partial list, and the post could go on for pages.The point is that we in Illinois need real assistance but, instead, get more laws.Too bad the levy has already broken when it comes to bad mortgages and plummeting real estate values. But for what it’s worth, I hope some of the information about leads to relief for those who need it.

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Justia Opinion Summaries

In U.S. v. Robertson the 7th Circuit weighed in on the factors that should be taken into account when sentencing the perpetrators of non-criminal fraud – in this case, bankruptcy and mortgage fraud. Here the Defendants, a husband and wife, appeared to have reformed themselves and were contributing to their community when the matter came to a head.

Facts: The defendants bought up residential properties then sold them to straw men at inflated prices. The inflated bank loans were justified using false information about the buyers’ finances, down payment resources, and intentions about remaining in the properties. Before it collapsed, the scheme had resulted in 37 transactions that cost the lenders involved more than $700,000.

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According to the American Bankruptcy Institute, interpreting the data supplied by the National Bankruptcy Research Center, the number of consumer bankruptcies filed last month was 11% lower than it was last year. That fact is also consistent with the 2011 trend of fewer new filings each month than in the same month of 2010.

All of which sounds promising until we remember that last month 113,432 Americans still had to file bankruptcy to ward off severe financial turmoil, much of it due to their upside down mortgages and ever-sinking home values: trends that have not changed in 2011.

According to ABI Executive Director Sam Gerdano, consumer bankruptcies are declining due to the deleveraging of credit card accounts by consumers and the fact that new credit is so hard to get. 

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