Who doesn’t love it when a plan starts to come together? Detroit’s economic recovery may not be a wish upon a star anymore, especially if private businesses and charity groups continue to come together to support the ailing city. Reuters reports there is a new player in the game- JPMorgan Chase and Co. According to recent reports issued yesterday, the mega bank has agreed to provide the city with $100 million over five years to stimulate economic growth and development.
The Associated Press revealed today that JPMorgan Chase, the lending giant and the nation’s largest bank, will pay an estimated pay $614 million under a deal announced Tuesday to improve mortgage lending practices which were blamed for much of the housing crisis.
Think the financial crisis of 2008 is behind us. Think again, especially for banks that are still paying settlements which could cost an estimated $55 billion to $105 billion, according to S&P estimates. According to a report by USA Today, bank costs are still accumulating from legal actions which were filed for mortgages and mortgage securities.
A lot has been written about the “robo-signing” of foreclosure affidavits in the news, but very little has been written about what the feds are doing about that and other similar problems.
I just ran onto a recent article that pointed out how state law and federal law enforcement institutions have been aggressively pursuing credit banks for their false statements given to courts which helped them win countless judgments against credit card debtors. One judge called the false testimony submitted by the bank custodians as “robo-testimony,” a tongue-in-cheek jab at the credit card industry in comparison to its sister mortgage industry.
The only protection of consumers from false accusations made by the credit card industry is consumer law requiring creditors to supply a validation of any debt. The burden of proof of a valid debt has always squarely rested with the creditor in times past, but recently, one state has undermined the law by allowing collection agencies to use electronic entries as proof of a debt in their courts of law.
That means if a creditor electronically types into a spread sheet that you owe them money and presents the evidence in court, the burden of proof shifts to you to prove you do not. Collection agencies would benefit the most from such a law because credit banks have not done a good job of record keeping. The agencies buy debt without the reliability the books are right and the debt is truly owed.
In other states, the government is aggressively seeking to remedy the problems associated with the testimony not supported by facts. Former judgments granted to the credit banks are now coming under scrutiny. Attorney Generals across the nation along with the Consumer Financial Protection Bureau are looking into suing the credit banks to overturn awarded judgments. Some are suggesting that credit banks should be charged for racketeering under the Racketeer Influenced and Corrupt Organization Statutes for selling questionable documented accounts to debt collection agencies.
Because of the pressure being applied to the credit banks across the nation by the government agencies, the credit banks are starting to abandon collection lawsuits because of the existing climate. As an example, JPMorgan Chase and Company abandoned over 1,000 collection lawsuits since April of 2011.
The Federal Trade Commission Bureau of Consumer Protection (FTCBCP) recently won a lawsuit against a large collection agency for “re-aging”, a term used to describe debts that are older than the statute of limitations, but restart the clock of the old debt by getting the debtor to make any payment toward the old debt. The FTCBCP thinks these moves have been “illegal and abusive.”
For those of you still experiencing a lot of credit card debt and can no longer pay the high interest, penalties, and fees, I would not hold my breath waiting on the government to straighten out the problem. Even if successful in prosecuting the credit banks, you probably won’t see any financial relief for their efforts.
Your best bet for financial relief is still filing bankruptcy or holding out until the statute of limitations comes into play. The statute of limitations for most states is usually between 4 to 7 years.
If you have to file bankruptcy, it is recommended you consult with a bankruptcy attorney.
As a followup to the news blog I posted on January 17, 2012 entitled, Lawsuits Ease on Credit Card Debt, new details may have surfaced that will shed light on the now scandalous actions of the big credit card and mortgage banks like JPMorgan Chase.
At the time of the posted blog, Chase Bank has eased up on their lawsuits to collect consumer debts. They released many of their retained lawyers who were committed to filing lawsuits on their behalf, in particular, challenging the automatic stay provision for bankruptcy filers in bankruptcy courts.
Evidently, the reason for Chase Bank and other banks to ease up on the lawsuits might have come to light in the past few days. According to news reports posted across the internet, Chase Bank blatantly fabricated many documents in proving their cases before bankruptcy judges across the nation. This allegedly happened in tens of thousands of cases.
Ernest Michael Bakenie, a lawyer who news reports say is proposing to file a class action lawsuit against the JPMorgan Chase bank for fraud states, “Through the use of fabricated assignments, endorsements, and affidavits that purport to transfer deeds of trust, notes and the rights to all monies due under the terms of tens of thousands of non-negotiable promissory notes (MLNs); Chase Bank has demonstrated a practice of playing hide-and-seek with debtors, judges, and other bankruptcy players.”
We learn from the same news sources that part of the fabrication of documents Chase Bank allegedly made were for MLNs. The fabricated MLNs were reportedly used to provide a cheap way in proving their case to stop over 7,000 bankruptcy stays. Instead of providing any original documents, Chase Bank is being accused, at least by gossip at this point, of making high quality shop-photos of documents that do not exist.
If true, that means Chase Bank might have committed fraud in deceiving the bankruptcy courts concerning their alleged clients.
Whether or not the Bakenie lawsuit ever materializes, settles out of court, or even exists for that matter, there has been information from these reports that raise enough questions for the Feds to investigate whether or not Chase Bank has altered documents and committed fraud. For the Feds to sweep this one under the rug without a real and thorough investigation will be a travesty of justice, rumors notwithstanding.
How the Breaking News Might Affect Bankruptcy
Bankruptcy law is serious matter, and bankruptcy judges are known to have long arms that can reach out and change the lives of those who file bankruptcy, especially if expected fraud is involved. The problems with the long arm theory is that companies like JPMorgan Chase have long and deep pockets.
All of this makes me wonder if companies like JPMorgan Chase, a potential participant in fraud, have used their lobbyists to grease the pocket linings of senators and congressmen, those same people who have influential power over the appointment of various bankruptcy judges.
I know that is a jaded and cynical attitude toward our system of justice and political system, but if the rumors and gossip are anywhere close to being true, this fleecing of our basic governmental precepts should be addressed to restore the American hope of a new beginning, especially a financial new beginning.
- What Effect Does Filing a Bankruptcy have on a Lawsuit or Judgment? (betterbankruptcy.com)
- MF Global Said to Have Told JPMorgan Transfer Was Proper (businessweek.com)
- Chase Accused of Brazen Bankruptcy Fraud (timothymccandless.wordpress.com)
Major title company says it won’t issue policies for new GMAC contracts
[Editor’s Note: This is the second of seven parts about major lenders that are suspending residential foreclosures. See links to the rest of the series at the bottom.]
A day after we posted Part 1, Bank of America on Oct. 1 joined GMAC Mortgage and JP Morgan Chase in at least temporarily suspending residential foreclosures, although BOA’s action may not be as far reaching.
Reports The New York Times:
Bank of America, the country’s largest mortgage lender by assets, said on Friday that it was reviewing documents in all foreclosure cases now in court to evaluate if there were errors.
But Bank of America went further than the first two lenders, GMAC Mortgage and JPMorgan Chase, which have said they will amend paperwork only in cases they think were improperly done. So far, that has amounted to only a [relative] handful of cases.
Bank of America, in an e-mailed statement, said it would “amend all affidavits in foreclosure cases that have not yet gone to judgment.”
That could mean tens of thousands of foreclosure cases would be in limbo for months or, if the consumers in default hire lawyers, years.
Spokesmen for the bank said that they were uncertain how many cases the lender currently had in court. They provided no timeline or explanation for the freeze, saying only that the bank planned to eventually resubmit all the cases.
A litany of possible litigation
Possible side effects have popped up, too. First to ripple the mortgage pool was a major title insurance company’s announcement that it will no longer provide title insurance to affected companies.
From USA Today: “Old Republic National Title Insurance, among the nation’s largest title insurance companies, will no longer write new policies for homes foreclosed upon by J.P. Morgan Chase and Ally Financial’s GMAC Mortgage unit –– a sign that concerns about faulty foreclosure paperwork could now endanger new sales of foreclosed homes.”
A CNBC.com blog speculates on other potential fallout, including:
- *the possibility of a counter-wave of lawsuits, given that “legions of trial lawyers must be champing at the bit to file suit against” the lenders
- *another, separate level of potential lawsuits if, “for example, it comes to light that banks disproportionately foreclosed on economically disadvantage home owners, because those homeowners would have been less likely to have the resources necessary to prolong the foreclosure process”
- *the possibility of SEC action action publicly traded banks, coupled with the potential for stock losses
- *an almost given hickey to the balance sheets of lenders shackled to non-performing loans and the attendant illiquidity–not to mention continued maintenance costs for any properties where families have already given up hope and abandoned.
- *The blog also questions the effects on new loans, but then it doesn’t seem that major lenders have exactly bent over backwards to help most people get new loans, anyway.
Of course, the biggest spectre in the moonscape of “worst nightmare” civil-suit scenarios might well originate with a slew (or a huge class action) of suits filed by wrongfully evicted homeowners, who conceivably could win back possession of homes that have already been sold through foreclosure.
Potential criminal charges
This “DealBook” post from The New York Times today provides further details of possible legal action: “Any misstatements to a court in a foreclosure proceeding could result in the judge holding the party in contempt, and perhaps even referring the case for a perjury or obstruction of justice prosecution. Not surprisingly, judges do not take kindly to being misled, so any individual proceedings in which problems arise can result in the court imposing a sanction, such as dismissing the case.”
Furthermore, if the feds get involved via the Department of Justice (as opposed to the SEC–restricted to civil litigation) criminal proceedings could evolve via mail and wire fraud charges. And, says DealBook, “If the foreclosures involved loans guaranteed by the federal government, like programs administered by the Departments of Housing and Urban Development and Veterans Affairs, then the federal false statement statute, 18 U.S.C. § 1001, could come into play for any documents submitted to those agencies.
Even more severe–and this is beyond the various states that might queue up to take a crack at the banksters–is the possibility that “the cases could be brought in federal court under the Racketeer Influenced and Corrupt Organizations Act, better known as RICO. That statute, one of the few criminal provisions that authorizes civil suits in addition to criminal prosecution, makes it a violation in 18 U.S.C. § 1962(c) for any person to be associated with an ‘enterprise’ who is involved ‘in the conduct of such enterprise’s affairs through a pattern of racketeering activity or collection of unlawful debt.’ ”
Possible upside for homeowners, communities
Even without any of the preceding coming to pass, the possibility exists that folks will get some benefit.
An Oct. 1 “DealBook” post echoes our sentiments from Part 1, in which we noted that hard-pressed homeowners who want to save their homes can use this time to save money and plan strategy with a qualified bankruptcy attorney. Benefits to the community could include helping the rise of short sales to establish a floor for distressed properties.
That DealBook post lists another advantage: perhaps the balky banksters will at last find a reason to do what they should have been doing all along–help homeowners who still want their homes: “Maybe this is like shock therapy,” said the economist Karl E. Case. “Maybe this will actually get the lenders to the table and encourage them to work out deals that are to the benefit of everybody.”
The foreclosure scandal series:
The bankruptcy reform act of 2005 increased the complexity of the law, but if you are overwhelmed by debt, filing for bankruptcy protection may be your most pragmatic alternative. If you are facing foreclosure of your home (sometimes referred to as your “primary residence,” as opposed to a second home, or “vacation home”), bankruptcy protection may be your best route to saving the home. If you are struggling with medical bills, you may be in a special category for setting debt aside, and if you have problems with credit-card debt, you should be aware that some of those laws have changed recently, too.
Whatever you do, before making major, life-changing financial decisions, consider consulting a trained, experience attorney. If you think your home is a candidate for a short sale, be sure to ask your attorney about it–it could greatly affect your standing and strategy for starting over.
For bankruptcy basics, please see: