13 Questions: Here is what the OCC said should be minimum operating standards for “servicers”
by Neil Garfield
On April 19, 2013, the Office of the Comptroller of the Currency (OCC) published “Operating standards for scheduled foreclosure sales.” This was about 5 years after public recognition of the mortgage meltdown, and 1 year after the infamous 50-state settlement in which the “servicers” and Wall Street brokers settled claims of fabrication of false documents that were forged, backdated, and robosigned. Another 50-state agreement was reached last year in a settlement with Nationstar, now known as Mr. Cooper.
The settlement was all about money with some provisions in which the “servicers” promised to take corrective action. It should have been about title. It avoided the essential question on the table: Why was it necessary for anyone to fabricate and forge false documentation? In an industry that invented all the paperwork for “loans”, why was it necessary to trash the original paperwork and invent new stuff? None of the parties to the agreement or the Wall Street brokers that paid for it ever changed anything. see foreclosure_standards_42013
The interesting thing about all this is that these minimum standards are said to apply only after the foreclosure process is complete and a sale is scheduled. Why they wouldn’t be applied at the commencement of “servicing activity” is or should be subject to scrutiny. This effectively gives a pass to anyone operating under false pretense right up until the actual sale.
I would also add that the one question missing from all of this that should be present is the one posed by Article 9 §203 of the UCC: Has the named claimant paid value for the underlying obligation? That statute, adopted by all U.S. jurisdictions verbatim, says simply that there can’t be foreclosure by anyone who has not fulfilled that condition precedent.
Here are the questions posed by OCC:
1. Is the loan’s default status accurate? [Editor’s Note: Failure to understand the possibility of false claims for securitization — the question should have the following words tacked onto the end “as to the named claimant.” Wall Street has been successful at pointing to scheduled payments as the sole basis for the action. But knowledge of scheduled payments does not mean ownership. Litigators who fail to understand this distinction are giving away the store. A secondary question here which probably ought to be the first question is whether there is a debt, i.e.: is there anyone who is carrying the alleged debt as a loan account receivable on its accounting ledgers?]
2. Does the servicer have and can demonstrate the appropriate legal authority to foreclose (documented assignments, note endorsements, and other necessary legal documentation, as applicable)? [Editor’s Note: It isn’t enough that there are documents fabricated to demonstrated the claimed authority. The authority can only come from one who paid value for the underlying debt and who owns it. Note that it is possible under the “securitization” scheme invented by Wall Street to pay value without getting a conveyance of any right, title or interest in the scheduled payments of a homeowner — e.g., investors who buy certificates]
3. Have required foreclosure notices or other required communications to the borrower or others, as applicable, been provided in a timely manner?
4. Has the servicer taken all steps necessary to confirm whether the borrower, co-borrower, and all obligors on the mortgage, trust deed, or other security in the nature of a mortgage are entitled to protections under the Servicemembers Civil Relief Act (SCRA), including running queries through the Department of Defense database? If the borrower, co-borrower, or other obligor is subject to SCRA protections, has the servicer complied with all applicable legal requirements to foreclose?
5. Determine whether the borrower is in active bankruptcy. If so, does the servicer have documented legal authority to foreclose? [Editor’s Note: Again the emphasis is on documents instead of a determination as to whether the documents are a memorialization of some real transaction in the real world or just some imaginary transaction to justify a disinterested party getting the windfall award of foreclosure.]
6. Determine whether the loan is currently under loss mitigation or other retention review or such review has been requested by the borrower as part of the foreclosure process. If so, did the servicer notify the borrower that all conditions necessary to effect the loss mitigation or retention action have not been met, what is needed to meet those conditions, and the date necessary to cure the deficiencies to avoid further foreclosure action? If a borrower submitted a complete loan modification application after the foreclosure referral, did the servicer comply with any applicable dual track restrictions? [Editor’s Note: The missing question is whether the “servicer” or anyone else has any legal authority to solicit, accept, consider or decide upon loss mitigation and retention. If they are not the owner of the debt or presenting someone who owns the debt (by virtue of payment in exchange for a conveyance of the debt) then they should not be accepting any discussion, correspondence to communication regarding the alleged debt.]
7. Is the borrower currently in an active trial loss mitigation plan?
8. Determine whether the servicer accepted any payment from the borrower in the preceding 60 days (that is, were borrower payments, including interest, principal, fees, escrow payments, applied to the borrower’s account or retained in a suspense account). If so, did the servicer clearly communicate to the borrower that he or she is neither in nor being considered for a loss mitigation program and that the bank’s acceptance of the payment in no way affected the status of the foreclosure that is proceeding?
9. As applicable, was the borrower solicited for and offered a loss mitigation option, such as, those required by HAMP, government sponsored enterprise, the Federal Housing Administration, the U.S. Veterans Administration, state-level government programs under U.S. Department of Treasury, other third party investor, or the servicer’s loss mitigation and modification programs? To the extent applicable, has the servicer complied with its loss mitigation obligations detailed in the National Mortgage Settlement? Have any borrower complaints, appeals, or escalations been considered and addressed? [Editor’s Note: The obvious problem here is the reference to third party investors. So they are conceding that third-party investors might be involved but still allowing a virtual creditor to be designated as the claimant. Again, litigators who fail to notice this distinction are probably doomed to failure in attempting to defend against illegal foreclosures. ]
10. Was the fully executed loan modification application submitted by the borrower, as defined by the applicable modification program, reviewed by the servicer as required, including any timeline or notice requirements?
11. Was the modification decision correct and validated as required by the applicable modification program (to include, as applicable, compliance with program requirements and accuracy of calculations and application of the NPV test) along with appropriate resolution and communication of any borrower complaint, appeal, or escalation?
12. Was the borrower or the borrower’s representative (housing counselor or attorney) notified of the loan modification decision and rationale as required by program or policy guidelines?
13. If required by a GSE or other investor, has the servicer certified to the attorney conducting the foreclosure that all delinquency management requirements have been met, including that there is neither an approved payment plan arrangement nor a foreclosure alternative offer pending or accepted?
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