Deutsche Bank to Fight $14 Billion Demand From U.S. Authorities

Deutsche Bank shares tumble on U.S. fine

Reuters | September 16, 2016         Deutsche Bank (DBKGn.DE) said it would fight a $14 billion demand from the U.S. Department of Justice to settle claims it missold mortgage-backed securities, a shock bill that raises questions about the future of Germany's largest lender.

The claim against Deutsche, which is likely to trigger several months of talks, far exceeds the bank's expectations that the DoJ would be looking for a figure of only up to 3 billion euros ($3.4 billion).

The demand adds to the problems facing Deutsche Bank's Chief Executive John Cryan, a Briton who has been in the job for a year.

The bank only scraped through European stress tests in July and has warned it may need deeper cost cuts to turn itself around after revenue fell sharply in the second quarter due to challenging markets and low interest rates.

Deutsche Bank shares, which have lost around half their value this year, tumbled 7.6 percent to 12.10 euros in Frankfurt on Friday, with analysts saying the bank may need to raise fresh funds from investors or sell assets to shore up its capital ratios.

The cost of insuring Deutsche Bank debt against default rose by around eight percent.

The bank, which employs around 100,000 people, said it regarded the DoJ demand as an opening shot.

"Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited," it said in a statement.

"The negotiations are only just beginning. The bank expects that they will lead to an outcome similar to those of peer banks which have settled at materially lower amounts."  Read more here.

UBS Blamed in U.S. Trial for $2.1 Billion in Mortgage Bond Losses

Reuters | April 18, 2016     UBS AG went to trial on Monday over $2.1 billion in losses that investors incurred on mortgage-backed securities after the collapse of the U.S. housing market.

The non-jury trial in Manhattan federal court stems from a lawsuit being pursued by U.S. Bancorp on behalf of three trusts established for mortgage-backed securities, the type of financial product at the heart of the 2008 financial crisis.

Sean Baldwin, the trusts' lawyer, in his opening statement said UBS contractually agreed that the mortgages underlying those securities would meet certain standards. When pervasive defects emerged, the bank refused to buy them back, he said.

"UBS's strategy has always been the same throughout this process: Turn a blind eye to the problems and ignore its contractual obligations," he said.

But Thomas Nolan, a lawyer for UBS, told U.S. District Judge Kevin Castel that the trusts' lawyers were looking at the loans with a "hindsight bias," and the question was whether the loans were seen as defective when they were issued in 2006 and 2007.

"Sophisticated parties on both sides knew what they were getting into," Nolan said.

The case is one of a handful to go to trial in recent years over losses incurred on mortgage bonds following the U.S. housing market meltdown.  Read more here.

Widows, Divorcees Struggle with Foreclosure Rules, Consumer Group Finds

Boston Globe |  March 23, 2016      Lenders and mortgage companies have been doing a better job in recent years helping homeowners avoid foreclosures, but widows, as well as other surviving family members, and the recently divorced continue to struggle to stay in their homes, according to a new report from the National Consumer Law Center.

The Boston-based consumer group estimates that thousands of homeowners, usually women who didn’t sign the original loan documents, are having trouble getting access to relief that new federal guidelines have provided other homeowners since the recent foreclosure crisis.

The center’s network of lawyers and housing counselors reports that while other foreclosure-related problems have declined, this remains an area of growing concern. It can still take years, reams of paperwork, and thousands in additional costs for spouses facing death, divorce, or domestic violence, who are seeking a loan modification to stay in the house, said Alys Cohen, a staff attorney at the consumer law center and author of the report.

“Every month of delay increases the interest that a homeowner owes, increases the fees on the loan amount, and decreases the chances of a loan modification,” Cohen said.

The law center is urging the federal Consumer Financial Protection Bureau to adopt rules that would expand protections to others who may have homeownership interest in a property, aside from just the primary borrower.  Read more here.

Voices: For Some, Foreclosure Means Free Housing

USA Today - Opinion | January 4, 2016    LAS VEGAS -- I used to think of foreclosure as chillingly final. Then I visited this city, where the slow unspooling of the great housing crash of 2007-2009 is affording free shelter to tens of thousands of people.  Most are living in homes they technically still own, but on which they haven’t made a mortgage payment in months or years; others are squatting illegally in homes that were abandoned by owners who defaulted on mortgages.  These homes are in real estate limbo — in foreclosure, but not actually foreclosed — because many lenders are taking their time completing the process that eventually leads to repossession and resale.  Read more here

Fed Sets Deadline For Claiming Checks Under Foreclosure Agreement

The Wall Street Journal |  November 19, 2015    Borrowers have until the end of March 2016 to deposit checks received from a 2013 agreement.  Hoping to bring its foreclosure review process to an end, the Federal Reserve is giving borrowers in the program until next year to cash the checks they are entitled to under a 2013 agreement.  Read more here.  

MERS' Role in Foreclosures

Mortgage Electronic Registration Systems, Inc. (MERS) is a Delaware Company based in Reston, Virginia.  MERS is named on nearly all mortgages and deeds of trust in the USA as the “beneficiary” of the mortgage “solely as nominee for lender and lender’s successors and assigns.”  As is the case in these days of securitization, the original lender named in a mortgage or deed of trust is not usually the party that attempts to foreclose on the loan.  That means the original lender sold the loan into the secondary market, either to be securitized by Wall Street or otherwise. 

Since the 2008 housing crisis, many Texas state courts and Texas federal courts have upheld the proposition that a homeowner may challenge the standing of a bank that claims the right to conduct foreclosure.  These cases hold that a party that is not the original lender has to show an unbroken chain of assignments and/or transfers from the original lender to itself of either the mortgage note or deed of trust in order to foreclose. 

However, the banks have used MERS’ status as “beneficiary” of the security instrument “solely as nominee for lender and lender’s successors and assigns” to try to avoid showing what parties actually are in the chain ofassignments and/or transfers of the loan documents.  The banks will simply file an assignment in the real property records from MERS to the party that is foreclosing and argue that such an assignment demonstrates a complete chain of assignments from the original lender to the party that is foreclosing.  However, on nearly every MERS assignment, MERS does not state for whom they are acting as “nominee” in making the assignment; rather they simply recite that MERS is acting “solely as nominee for lender and lender’s successors and assigns.”  The question thus becomes, for whom is MERS making the assignment for as a “nominee”?

It is common knowledge that MERS does not actually hold or own mortgages or mortgage notes in its own name.  This is the conclusion reached by a federal judge in the Southern District of Texas in the case of Nueces County v. MERSCORP Holdings, Inc., No. 2:12-CV-00131 (Docket #70), 2013 U.S. Dist. LEXIS 93424 (S.D. Tex. July 3, 2013) (“MERS is not a lender, and it does not have the rights of a lender, note holder, or note owner to enforce a promissory note and seek a judgment against a debtor for the repayment of loans.  MERS is merely an agent or nominee of its members, who are banks, lenders, and other financial institutions that hold and trade promissory notes secured by deeds of trust naming them as the lenders and MERS as the beneficiary.”  Id. at 12 (emphasis added).  “MERS has no right to enforce the promissory notes or seek judgments against borrowers in default. MERS is simply the nominee of the beneficiaries of the security instruments with the right to foreclose on behalf of the secured parties under the deeds of trust. In sum . . . Texas law [does not] support Defendants’ argument that MERS may serve as a secured party or lienholder.”  Id. at 22 (emphasis added)).  You can read a copy of Nueces County v. MERSCORP Holdings, Inc. here.

Jackson & Elrod, LLP has several cases pending where this issue has been presented to the courts.  As of this writing, the firm has been able to convince one Texas federal court that MERS’ failure to identify for whom they are acting as “nominee” in a mortgage assignment creates a claim under the Texas Fair Debt Collection Practices Act for “misrepresenting the status or nature of a debt.”  Johnson v. Morrison Home Funding et. al., No. H-14-2549 (Docket #30) (S.D. Tex. August 6, 2015).  You can read a copy of the Johnson memorandum and order here.

Jackson & Elrod, LLP will continue to fight to protect Texas homeowners’ common law right to have the foreclosing bank reveal the true real-parties-in-interest along a chain of assignments and/or transfers of a loan.  If the banks are allowed to skirt this requirement, they will be incentivized to blow up more housing bubbles since the law will not require them to actually complete contemporaneous transfer documents when a loan is sold in the secondary market.  The ability to flash-trade mortgage loans leads to speculative bubbles and a lot of innocent victims in our society when the bubbles crash.

 

 

Foreclosure Abuses, Revisited

The New York Times |  October 6, 2015   The promise of widespread relief for homeowners facing foreclosure in the wake of the housing bust has never been realized. The government did not require the banks to rework bad loans, which in many cases the banks offloaded on the federal agencies that insured them. Now these same agencies are selling some of these loans at a discount to hedge funds and private equity firms. Has this merry-go-round helped homeowners? No. The myth of mortgage relief lives on.  Read more here.