Daily Archives: February 16, 2012

California Audit Finds Broad Irregularities in Foreclosures – NYTimes.com

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California Audit Finds Broad Irregularities in Foreclosures – NYTimes.com.

An audit by San Francisco county officials of about 400 recent foreclosures there determined that almost all involved either legal violations or suspicious documentation, according to a report released Wednesday.

Phil Ting, the San Francisco assessor-recorder, found widespread violations or irregularities in files of properties subject to foreclosure sales.

Anecdotal evidence indicating foreclosure abuse has been plentiful since the mortgage boom turned to bust in 2008. But the detailed and comprehensive nature of the San Francisco findings suggest how pervasive foreclosure irregularities may be across the nation.

The improprieties range from the basic — a failure to warn borrowers that they were in default on their loans as required by law — to the arcane. For example, transfers of many loans in the foreclosure files were made by entities that had no right to assign them and institutions took back properties in auctions even though they had not proved ownership.

Commissioned by Phil Ting, the San Francisco assessor-recorder, the report examined files of properties subject to foreclosure sales in the county from January 2009 to November 2011. About 84 percent of the files contained what appear to be clear violations of law, it said, and fully two-thirds had at least four violations or irregularities.

Kathleen Engel, a professor at Suffolk University Law School in Boston said: “If there were any lingering doubts about whether the problems with loan documents in foreclosures were isolated, this study puts the question to rest.”

The report comes just days after the $26 billion settlement over foreclosure improprieties between five major banks and 49 state attorneys general, including California’s. Among other things, that settlement requires participating banks to reduce mortgage amounts outstanding on a wide array of loans and provide $1.5 billion in reparations for borrowers who were improperly removed from their homes.

But the precise terms of the states’ deal have not yet been disclosed. As the San Francisco analysis points out, “the settlement does not resolve most of the issues this report identifies nor immunizes lenders and servicers from a host of potential liabilities.” For example, it is a felony to knowingly file false documents with any public office in California.

In an interview late Tuesday, Mr. Ting said he would forward his findings and foreclosure files to the attorney general’s office and to local law enforcement officials. Kamala D. Harris, the California attorney general, announced a joint investigation into foreclosure abuses last December with the Nevada attorney general, Catherine Cortez Masto. The joint investigation spans both civil and criminal matters.

The depth of the problem raises questions about whether at least some foreclosures should be considered void, Mr. Ting said. “We’re not saying that every consumer should not have been foreclosed on or every lender is a bad actor, but there are significant and troubling issues,” he said.

California has been among the states hurt the most by the mortgage crisis. Because its laws, like those of 29 other states, do not require a judge to oversee foreclosures, the conduct of banks in the process is rarely scrutinized. Mr. Ting said his report was the first rigorous analysis of foreclosure improprieties in California and that it cast doubt on the validity of almost every foreclosure it examined.

“Clearly, we need to set up a process where lenders are following every part of the law,” Mr. Ting said in the interview. “It is very apparent that the system is broken from many different vantage points.”

The report, which was compiled by Aequitas Compliance Solutions, a mortgage regulatory compliance firm, did not identify specific banks involved in the irregularities. But among the legal violations uncovered in the analysis were cases where the loan servicer did not provide borrowers with a notice of default before beginning the eviction process; 8 percent of the audited foreclosures had that basic defect.

In a significant number of cases — 85 percent — documents recording the transfer of a defaulted property to a new trustee were not filed properly or on time, the report found. And in 45 percent of the foreclosures, properties were sold at auction to entities improperly claiming to be the beneficiary of the deeds of trust. In other words, the report said, “a ‘stranger’ to the deed of trust,” gained ownership of the property; as a result, the sale may be invalid, it said.

In 6 percent of cases, the same deed of trust to a property was assigned to two or more different entities, raising questions about which of them actually had the right to foreclose. Many of the foreclosures that were scrutinized showed gaps in the chain of title, the report said, indicating that written transfers from the original owner to the entity currently claiming to own the deed of trust have disappeared.

Banks involved in buying and selling foreclosed properties appear to be aware of potential problems if gaps in the chain of title cloud a subsequent buyer’s ownership of the home. Lou Pizante, a partner at Aequitas who worked on the audit, pointed to documents that banks now require buyers to sign holding the institution harmless if questions arise about the validity of the foreclosure sale.

The audit also raises serious questions about the accuracy of information recorded in the Mortgage Electronic Registry System, or MERS, which was set up in 1995 by Fannie Mae and Freddie Mac and major lenders. The report found that 58 percent of loans listed in the MERS database showed different owners than were reflected in other public documents like those filed with the county recorder’s office.

The report contradicted the contentions of many banks that foreclosure improprieties did little harm because the borrowers were behind on their mortgages and should have been evicted anyway. “We can deduce from the public evidence,” the report noted, “that there are indeed legitimate victims in the mortgage crisis. Whether these homeowners are systematically being deprived of legal safeguards and due process rights is an important question.”

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Online Surveillance Bill Amendment May Be Possible After Torrent Of Criticism

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Online Surveillance Bill Amendment May Be Possible After Torrent Of Criticism.

The Harper government signalled Wednesday it’s open to softening a controversial bill that would give authorities easier access to information about Internet users.

The shift came after a torrent of criticism about the legislation — including concerns from some of its own MPs.

In the House of Commons, Public Safety Minister Vic Toews said the bill would skip the second-reading stage and be sent directly to committee — a move that would make it easier to alter the content.

Generally bills only go to committee after receiving second reading, considered approval in principle from the Commons.

Following question period, Government House leader Peter Van Loan said dispatching the bill to committee now is a sign “that the government is open to a broad range of amendments in order to get the right balance.”

The bill’s tabling Tuesday touched off a heated debate about whether the measures unduly violate privacy.

It would allow authorities access to Internet subscriber information — including name, address, telephone number and email address — without first getting court approval. Currently, release of such data, held by Internet service providers, is voluntary.

The government says the legislation is simply an attempt to bring the law into the 21st century — a much-needed update to keep pace with child pornographers and other criminals who prowl online.

Privacy advocates say the bill goes too far, giving the state Big Brother-like powers to peek into people’s online lives.

“We’re hammering this bill and we’re going to continue hammering this bill because this bill is attacking some fundamental freedoms of Canadians,” said New Democrat MP Charlie Angus.

It became apparent Wednesday that some Conservative MPs share that uneasiness.

“I think it’s too intrusive as it currently stands and does need to be looked at,” said Tory John Williamson, a rookie MP from New Brunswick. “There’s a lot of concern, I think, across the country.”

Ontario Conservative MP David Tilson said he wants to be satisfied that if police are eavesdropping on people, they have permission from a court. “If they don’t have that, well then I’ll be concerned. So I want to hear more about it first.”

Veteran Alberta MP Rob Anders said “there’s probably going to be amendments” to the bill.

He said there are likely ways to adjust the legislation so that police could swiftly deal with child pornographers on the Internet while allowing for court-ordered warrants in other cases.

Angus said Toews is backpedalling because “he came in and stuck his finger in the political socket and he’s been thrown back.”

“We’re standing with the privacy experts. And we’re saying this is above and beyond the rule of law and the minister has to stop hiding behind child victims. He has to come up and explain why he wants to spy on Canadians.”

Jefferson County, While Bankrupt, Relies On ‘Volunteer’ Staffers For Election

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Jefferson County, While Bankrupt, Relies On ‘Volunteer’ Staffers For Election.

In bankrupt Jefferson County, Ala., the financial situation has grown so grim that the county does not have the money to hire enough elections division staffers to run the state’s March Republican primary.

Since filing the nation’s largest municipal bankruptcy in 2011, Jefferson County officials have slashed more than $95 million from local government spending, cut 750 workers and initiated the process of laying off another 180 employees. Even with these cuts, Jefferson County — home to Alabama’s largest city and about 660,000 people –- faces a projected $40 million budget shortfall this year.

If any more cuts are made, the county risks violating state and federal election laws during Alabama’s Republican primary, warned County manager Tony Petelos in January. The county’s election division now has only about 90 employees, compared with nearly 250 workers last year, Petelos said. The county has a total of 182 voting sites, which will make covering the polls with adequate staff a challenge on Election Day, March 13.

“What I said then is true now,” Petelos said Wednesday in a phone interview. “We just don’t have the manpower we need. But we’ve worked on it and with some teamwork, I think we’re going to make the election happen.”

What’s happening in cash-strapped Jefferson County represents an extreme version of the crisis facing municipalities around the country. The huge shortfalls in tax revenue in the aftermath of the Great Recession — and the cries for small, ruthlessly efficient government, for that matter — don’t always jibe with the services that public agencies are expected or legally required to provide.

To staff the upcoming elections in March, Petelos will use employees from other divisions who have volunteered for election duty and who will be paid at their ordinary rate. Petelos will send his administrative assistant to the election division, and staff from other county offices, including the land planning and storm water divisions, will also pitch in, he said. The precise number of staffers to be redirected is not yet clear. They will receive limited training on details like, say, which church-based polling sites require a call to the pastor before election machines can be placed in the fellowship hall. To pull off the election, the county staff, on loan from other departments, will not do their usual jobs.

“Roads and Transport will be delivering election machines a few days before the election,” Petelos said. “So, yes, they won’t be out there cutting grass or repairing roads during that time.”

Jefferson County also does not have a chief accountant, a finance director or a chief financial officer. But this week, county commissioners approved a plan to hire a capital structure and investments manager to oversee its $4.2 billion debt and investment portfolio.

The county’s new capital structure and investments manager — someone with a deep understanding of the bond market, municipal finance and debt management — will play an essential role in helping the county emerge from bankruptcy protection, Petelos said. The manager’s $130,000 salary, about $85,000 below than the area’s median household income, represents less than a quarter of the $600,000 that the county had paid a team of outside investment consultants each year, Petelos said. The county commission fired the outside team in 2011.

“Maybe if we had somebody with knowledge of the bond market in-house years ago, Jefferson County would not be in the position that it is in today,” said Petelos, referring to the county’s bankruptcy and a high-risk bond-financing package that has mired the county’s finances.

Jefferson County was forced to declare bankruptcy in November. The move followed years of legal wrangling. Last year Alabama’s Supreme Court declared invalid a tax that brought about $66 million in annual revenue to the county, about 45 percent of the general fund. Jefferson County could no longer cover debt payments associated with a massive sewer-improvement project that had been initiated in the 1990s.

County officials approved the sewer project after pollution was discovered spilling into area rivers and a group of area environmentalists filed suit. In the early years of the past decade, commissioners also approved a complicated refinancing deal for the bonds used to pay for the sewer system project. The deal was supposed to lower the county’s interest rate payments. It has had the opposite effect instead.

More than 20 Jefferson County officials have faced political corruption charges in connection with the refinancing deal.