Former Fannie Mae employee found guilty of making millions on shady foreclosure sales

Ordered to forfeit a property she bought with a duffle bag full of cash

February 15, 2019 | HousingWire A former Fannie Mae employee is now facing 40 years in prison after being found guilty of accepting millions of dollars in bribes and kickbacks in exchange for selling Fannie Mae-owned foreclosures for less than market value.

Back in January 2018, Shirene Hernandez was charged with accepting bribes for steering foreclosures to certain brokers and even allegedly buying some foreclosures herself at below market value.

And this week, Hernandez was found guilty of two wire fraud counts that involved the deprivation of honest services.

Hernandez formerly worked at Fannie Mae in California as an REO foreclosure specialist and was tasked with the sale of properties foreclosed on by Fannie Mae. Read more here.

Supreme Court debates the meaning of the term 'debt collector' in a foreclosure protections case dating back to the financial crisis

  • The Supreme Court on Monday heard arguments in a case that dates back to the financial crisis a decade ago.

  • The justices, missing Justice Ruth Bader Ginsburg, attempted to resolve a legal question that could have broad ramifications on hundreds of thousands of Americans who are foreclosed on without a judicial process each year.

  • A key issue in the matter is who or what can be considered a "debt collector."

January 7, 2019 | CNBC Markets are racked by turmoil, and there are signs the booming U.S. economy could slow down later this year. Yet the Supreme Court is reckoning with the lingering fallout from the financial crisis that rocked the global economy a decade ago.

The top court on Monday attempted to resolve a legal question that could have broad ramifications on hundreds of thousands of Americans who are foreclosed on without a judicial process each year. A key issue in the matter is who or what can be considered a "debt collector." Read more here.

Wells Fargo Computer Glitch Blamed as Hundreds Lose Their Homes

CBS News | December 4, 2018 Wells Fargo says a computer glitch is partly to blame for an error affecting an estimated 545 customers who lost their homes. The giant bank filed papers with the Securities and Exchange Commission last month, revealing it incorrectly denied 870 loan modification requests. About 60 percent of those homeowners went into foreclosure. Read more here.

America’s Mortgage Market Is Still Broken

Ten years after the 2008 crisis, crucial flaws need fixing.

May 14, 2018 | Bloomberg           Regulators have done a lot to reform the financial system since the 2008 crisis, but they still haven’t fixed the market where the trouble started: U.S. mortgages. It’s an omission they need to put right before the next crisis hits.

Looking back, it’s easy to see what made U.S. housing finance so vulnerable. Loosely regulated companies, financed with flighty short-term debt, did much of the riskiest lending. Loan-servicing companies, which processed payments and managed relations with borrowers, lacked the incentives and resources needed to handle delinquencies. Private-label mortgages (which aren’t guaranteed by the government) were packaged into securities with extremely poor mechanisms for deciding who — investors, packagers or lenders — would take responsibility for bad or fraudulent loans.  Read more here.

 

New Wells Fargo Scandal Over Modifying Mortgages Without Authorization

CNN | June 15, 2017          Christopher and Allison Cotton had 16 years remaining on their mortgage when family medical expenses forced them into bankruptcy in 2014.

Wells Fargo went ahead and modified the North Carolina couple's mortgage several times without their authorization, according to a class action lawsuit. The bank extended the term of the mortgage by nearly 26 years, documents say.

If the "stealth" modifications hadn't been caught, the Cotton family's total interest payments would have nearly tripled to more than $140,000, the lawsuit said.

"I anticipate Wells Fargo has done this to thousands of customers," said Theodore Bartholow III, a lawyer who represents the Cottons and last week launched the class action.

News of the latest legal trouble facing Wells Fargo (WFC) was first reported by The New York Times. It comes as Wells Fargo continues to dig out of a scandal over unauthorized account openings and alleged worker retaliation.

Bartholow described an "insidious" process where Wells Fargo uses a routine, but little-noticed form to "sneak through" mortgage modifications on unsuspecting homeowners.  Read more here.

Bank Forecloses on 'Extreme Makeover' Homeowner

USA Today | May 26, 2017         HOLT, Mich. — Nearly nine years after her home was rebuilt on national television, Arlene Nickless must turn in her keys.

Designers with ABC’s Extreme Makeover: Home Edition — with the help of hundreds of volunteers — built her family's home in 2008 following the death of Tim Nickless, her husband of 18 years. But Arlene Nickless has been struggling to manage the mortgage for years and must leave by Monday.

The home was foreclosed on in September and has been up for auction online for weeks.

This past Sunday, cardboard boxes were stacked on the dark hardwood floors once showcased in nationwide broadcasts. The 2009 Ford Flex given with the home sat in the driveway hooked to a moving trailer.

And the overwhelming feeling a tearful Arlene Nickless had all those years ago took on a different tenor.

“When I stepped out of the house the day Extreme Makeover came, you will see me say ‘I can’t believe this is happening,’ ” she said. “And, truthfully, that’s what I feel right now: I can’t believe this is happening.”

Arlene Nickless is quick to defend the ABC show, whose lavish rebuilds have in some cases led to foreclosure because of increased property taxes and pricey utilities. She's less complimentary of her mortgage servicer that state regulators now are targeting.

Her home’s foreclosure resulted from an ongoing struggle to manage the property’s pre-makeover mortgage — a balance that rested at about $30,000 after the 2008 makeover, but had ballooned to at least $113,000 by the end of 2016, she said.  Read more here.

New Firms Catching Up to Banks in Foreclosure Rankings

The New York Times | March 30, 2017           The number of home foreclosures is down sharply from the depths of the financial crisis, even as many of the mortgage firms involved remain the same, including Fannie Mae, Wells Fargo, Bank of America and JPMorgan Chase.

But the latest foreclosure rankings also include a number of firms that barely registered or did not exist when the crisis began a decade ago.

These new entrants include firms affiliated with the private equity giant Lone Star Funds, the mortgage lender PennyMac Loan Services, the investment bank Goldman Sachs and the mortgage firm Carrington Mortgage Services.

This changing of the guard in the foreclosure rankings, based on data compiled by RealtyTrac, reflects the new reality that most foreclosures today are not coming from mortgages written during the post-crisis period, but from soured loans written before the crisis that are in the final stages of liquidation.

Quicken Loans, for instance, one of the top originators of mortgages issued during the last few years, ranks relatively low in terms of recent completed foreclosures, according to the RealtyTrac data.

Most of these newer firms that are moving up in the foreclosure rankings are ones that have bought soured mortgages and are looking to profit by restructuring those loans and getting delinquent borrowers to start making payments again. And when those efforts fail, the firms are foreclosing on borrowers, taking back the homes and reselling them.

Firms affiliated with Lone Star, PennyMac, Goldman and Carrington all have been staple buyers of distressed mortgages, either from big banks directly or from government agencies. Lone Star, a $70 billion private equity firm based in Dallas, has been one of the largest buyers and works in tandem with its wholly owned mortgage firm, Caliber Home Loans.  Read more here.

Goldman's Buying of Default Mortgages Not Without Risk

The Hill|  March 20, 2017        Goldman Sachs has launched an ambitious program to buy severely delinquent or nonperforming home mortgages as one element of a $5.1-billion settlement it has entered into with the federal government for its role in creating and selling mortgage-backed securities (MBS) in the years leading up to the financial crisis.

According to a Wall Street Journal article, Goldman has spent $4.5 billion to acquire 26,000 delinquent mortgages from Fannie Mae. Goldman did not originate any of these mortgages. It also has purchased similar troubled mortgages from Freddie Mac and private sellers.

Goldman intends to restructure the mortgages it has purchased with the expectation that the homeowners will then become current in making payments on them.  In accordance with its settlement agreement, Goldman will provide $1.8 billion of relief to homeowners, presumably by a combination of writing down principal balances, lowering interest rates on the mortgages and extending the repayment period.  Read more here.

Foreclosure Prevention Returns to the Unknown

The New York Times | January 25, 2017        After an eight-year run, a troubled government effort to prevent foreclosures and keep struggling borrowers in their homes came to an end last month.

What happens next will be a Trump-era laboratory experiment in how financial services companies conduct themselves when the regulatory fetters are loosened.

The expired Obama-era program — known as HAMP, the Home Affordable Modification Program — was widely criticized for its poor execution. Participation was voluntary for banks, and many that opted in did so unenthusiastically. (At one bank, “the floor of the room in which the bank dumped the voluminous unopened HAMP applications actually buckled under the packages’ sheer weight,” according to a scathing oversight report.)

Consumer advocates were also not thrilled; many felt that the program did not go far enough to help troubled homeowners or hold accountable the banks that contributed to their predicaments.

But Republican-led Washington has no intention of replacing it. So now it will be entirely up to the private sector to address a lingering social ill that was brought on by the financial crisis.

Banks and mortgage lenders say they are ready to step in with their own foreclosure-prevention programs, modeled on what they learned from the Obama administration’s effort. Armed with years of new data, financial companies say they now know how to make loan-modification programs successful, for both borrowers — who want to protect their homes — and lenders, who want to limit their losses on delinquent loans headed for default.

“There’s tremendous public good in having an industrywide approach,” said Justin Wiseman, the director of loan administration policy at the Mortgage Bankers Association, a trade group. “No one wants things to revert to what we had before.”

Still, housing advocates are skeptical, and for good reason: The mortgage industry was largely responsible for HAMP’s shortcomings (as well as for creating the need for the program in the first place). The business has long been littered with errors, confusion and outright abuses.

“We’re going back into uncharted territory,” said Jacob Inwald, the director of foreclosure prevention at Legal Services NYC, which helps low-income residents fight foreclosures and evictions.

Before the government stepped in “it was like the Wild West, with every servicer having their own program,” he said.  Read more here.

Deutsche Bank and Justice Dept. Complete Deal on Mortgage Crisis

The New York Times |  January 17, 2017        The Justice Department completed a deal with Deutsche Bank on Tuesday that will require the bank to pay $7.2 billion for its sale of toxic mortgage securities in the run-up to the 2008 financial crisis, the department said.

The settlement calls on Deutsche Bank to pay a civil penalty of $3.1 billion and provide $4.1 billion in consumer relief to homeowners, borrowers and communities harmed by its practices.

The total is the largest amount ever paid to resolve charges against a single entity for misleading investors in residential mortgage-backed securities, the department said in a statement.  Read more here.