Looking at homeowner eligibility for the $25 Billion DOJ / mortgage settlement

This memo is about the Department of Justice $25 billion dollar settlement with Bank of America Corporation (Countrywide as well) , J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial (formerly GMAC) . We have reviewed the Class Action settlement balance reduction calculator which is part three of three controlling documents prepared by the DOJ and consented to by the attorneys for the banks listed above. This calculator describes the different types of loans and what credits towards the total settlement the mortgage servicers are allowed to take for each class of modification.. You can find this calculator here http://www.legalforensicauditors.com/2012/03/16/the-big-fat-25-billion-ag-settlement-cough/ click the third link in the article to follow this. Keep in mind this is a consent ordered settlement. The banks consented. see the department of Justice website… http://www.justice.gov/opa/pr/2012/March/12-asg-306.html

Ok, There are three columns of data here. The first vertical column is the consumer relief column which describes the type of loan or the type of relief given to the consumer. The second column is the credit the servicers receive towards settlement for that particular type of relief and the third column contains the percentage cap for that category of relief. BTW This email is meant to focus our subscribers on whether or not your loan is a “high incentive” settlement loan. If you note that the second column on page 1 has a mathematical calculator showing that for portfolio loans (those owned by one of the listed banks) if the LTV (loan to value) is less than 175%, or ($175,000 owed in principal balance for each $100,000 in current value) then the bank gets $1.0 settlement credit for each $1.0 of principal reduction they give the consumer. This is the highest incentive allowed in the settlement calculator1 for 1. On the same page note that for each dollar of principal reduction given on value where the LTV is higher than 175% the settlement credit is only $.5 to $1.00. So for those homeowners whose homes are more upside down the settlement terms de- incent the servicer from giving the reduction on portfolio mortgages. Don’t worry the servicers probably won’t choose either in this category to do modifications you’ll understand why in a minute.

Now lets focus on where the meat of this $20 billion settlement credit is meant to come from. Where the notes are serviced by one of the banks listed for an MBS / and its Investors. See page 2 of the calculator. “Service for Others” These are securitized loans. Note that column three requires that the minimum percentage to come from the category of 1st lien principal reduction modifications for third party serviced loans is 30%. Looking at the math here the servicer gets $.45 in settlement credit per $1 homeowner principal reduction when the LTV is under the $175% threshhold, but only $.2 per $1 if his/her LTV is over 175%. This is where the bank MAXIMIZES the utility of the settlement terms because ITS NOT THEIR MONEY. They committed the fraud but they get to pass on the cost of the settlements to the MBS’s they sold their sub-prime mortgages to. They do not have to take a write down on their own books for this category of settlement credit. This we believe is good for most distressed homeowners because of the 67 million loans in the MERS system. They are forced by the suit to wrangle principal reductions from investors in MBS’s and mortgage pass through certificates (their own clients) and they get the credit towards their DOJ fraud settlement. Is it not hillarious how these servicers self deal even when they are getting sued. Also, if you think about this as if you were the banker looking for candidates to hand pick for settlement, you would try to minimize damage to your banks client from these settlement terms. So, if you can find someone who is behind by $50,000 or $100,000 (and had strong evidence that the MBS was never going to collect from that homeowner anyways) wouldn’t you focus your marketing effort there? If you do, you are adding these non-collectible balances to your credits toward settlement. It makes sense.

In any event if your loan is serviced by one of the banks listed in the first paragraph you may wish to become a squeaky wheel and send a nasty letter to your mortgage servicer . Get a securitization audit to locate your MBS and its PSA and you will most likely find proof that the note was never transferred to the MBS in accordance with the PSA (pooling and servicing agreement) No matter if you intend to file a quiet title action or put a bit of pressure on your servicer to add you to the DOJ settlement (if you have one of the servicers above) It never hurts to have evidence.

In the mean time we do have attorneys in California, Maryland, Virginia, New York, New Jersey, South Carolina, Georgia & North Carolina who file quiet title actions. We have recently added Ms. Westerfield in Sarasota Florida to our group. She is one of the attorneys teaching the CFLA seminar on Securitization and Quiet Title. To research Quiet Title as a method of unsecuring your promissory note by ridding the security interest your lender has in your property have a look at these videos. Good luck and have a great week.


Chloe, Ryan & Kyle.
LFA does securitization auditing to see a free copy of one of our securitization/chain of title audits and our affidavit give us a call.
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