Like the characters in "The Blair Witch Project", the banks are running scared!

Well what a wild week it has been.  When we came to work on Monday we feared President Obama would put the housing crisis to bed without ever holding the banks’ feet to the fire.

The settlement with the banks, which we have blogged about ad nauseam this week, seemed as sure as a chip-shot field goal.

But thanks to President Obama’s suddenly get-tough approach, as evidenced by his State of the Union speech, we’ve seen the banks’ kick go wide-right and now all bets are off.

Can There Be Real Change In Mortgage Industry?

Now we are not completely sold that things will play out exactly as homeowners would like, this is of course the federal government we’re talking about, but for the first time we have a true sense of optimism. The President may finally be seeing things our way, and we want to throw our full support behind him.

There is no doubt cages have been rattled in the mortgage industry, and nerves have been frayed. If Obama’s plan to re-write the foreclosure rules didn’t have some kind of teeth, then we doubt we’d be seeing the type of reverberation thorough the media and the top echelons of government that we’ve detected in the last few days.

Banks Are Fearful of Settlement Collapse

The settlement could be falling apart at the seems, at least JPMorgan Chase CEO Jamie Dimon thinks so.  He told CNBC this morning that Obama’s announcement to investigate the packaging and servicing of mortgage loans could stop the settlement cold.

“It has a pretty good chance of derailing it,” Dimon said in a televised interview from Switzerland, adding later, “I think it would be better for America if the settlement took place.”

Guess Dimon hasn’t been reading the South Florida Law Blog. You and I know it would be better for the BANKS if a settlement took place now, and we suspect Dimon knows that too.

From the moment the details of the settlement became public, there was push back from some of the Attorneys General, the legal community, and the media.

The New York Times mirrored our thoughts, in this Op-Ed piece published in Thursday’s paper they also wondered if this was finally the investigation that would end with criminal prosecution and dare we say, jail time.

New York AG Promises to Leave No Stone Unturned

The importance of the appointment of New York AG Eric Schneiderman, which we mentioned yesterday, can not be understated. His new unit, which will answer to the existing Financial Fraud Enforcement Task Force, will be composed of members of the Department of Justice, the SEC and the IRS. It will also be working with the existing hierarchies of those organizations.  So his reach will be far and wide, and we believe this investigation has the potential to do some real good.

Schneiderman, along with California AG Kamala Harris, have been some of the most outspoken critics of the settlement, and he is promising a thorough investigation of ‘every aspect of the conduct that created the bubble and crash’.

To us, those words ring true. Obama is embracing real change with his appointment, and we can’t wait to see what happens next.

Roy Oppenheim wrote a letter to the editor of The Wall Street Journal in response to its The Politics of Foreclosure editorial that ran Saturday, October 9^th. Oppenheim’s letter pointed out how the opinion article missed a number of significant legal, as well as macro-economic issues, that South Florida Law Blog will post if it is not printed by The Wall Street Journal.

Yesterday’s Wall Street Journal article: Foreclosures, Forestalled by reporter Robbie Whelan discusses the cause and effect this moratorium could have on the housing recovery.

Here is an excerpt:

Consumer advocates say the judicial process gives consumers a better chance to work out their problems. But Florida’s court system is so overwhelmed with foreclosures that last year it began calling judges out of retirement to handle hundreds of foreclosure cases a day in a forum that became known as the “rocket docket.”

The New York Times article: A Foreclosure Tightrope for Democrats had some profound quotes worth sharing.

“Irresponsible banks need to be held accountable, but if we have not found a problem with a bank’s process we do not believe that we should impose a moratorium where that can hurt the market and hurt individual buyers,” said Shaun Donovan, secretary of Housing and Urban Development.

Advocates for homeowners, however, say that the pattern of sloppiness allows and encourages more serious abuses. They point to a growing number of documented cases in which lenders mistakenly seized homes.

Bank of America apologized last month for foreclosing on a home in Fort Lauderdale, Fla. The homeowner didn’t even have a mortgage. The bank had failed to notice that the previous owner had repaid the mortgage loan.

Last year the company’s contractors entered the home of a Pittsburgh woman, changed the locks, cut off the utilities and seized her pet parrot. The bank later acknowledged that the woman had not missed any mortgage payments.

Other companies including Citigroup and JPMorgan Chase also have apologized

for mistaken attempts to seize homes they didn’t own.

Oppenheim Law continues to follow the unfolding developments of this nation’s bank fraud and foreclosure crisis and how it impacts the Florida homeowner. Let us know your comments.

Florida Foreclosure Attorney and Legal Blogger Roy Oppenheim hosts a workshop on this unprecedented topic: The Mortgage Foreclosure Crisis. The unfolding story is also reported on this week’s CBS 4 I-Team investigation.

This is a must attend, either via webcast or live in person, for:

• Those currently in foreclosure;
• Those who may have lost their homes illegally to an improper bank foreclosure by GMAC, JPMorgan Chase, Bank of America or other lenders;
• Those who may have purchased a home recently via an illegal foreclosure;
• Those who own “clean homes”; meaning they are not delinquent and want to sell their property now;
• People looking to buy a home and wondering what they must do to protect themselves; and,
• Anyone connected to the Title Industry.

What: Toxic Foreclosures and Foreclosure Fraud Workshop

When: Wednesday, October 6, 2010 – 6 to 7 p.m.

Where: Oppenheim Law TV

Or come in person

2500 Weston Road, Suite 404, Weston, FL 33331

Cost: Free with advanced registration
RSVP: To register, email roy@oplaw.net or call 954.384.6114

Email us questions ahead of time and we will try to work them into the one-hour workshop!

RSVP early, Space is limited. More details can be found on the Oppenheim Law website.

Humpty Dumpty sat on the wall.
Humpty Dumpty had a great fall.
All the king’s horses and all the king’s men.
Couldn’t put Humpty Dumpty back together again.

Most Americans, including some lawyers and even judges don’t understand what happened. Yes, it is complex and confusing. But at the end it’s real simple.

In the old days, a bank would lend a homeowner money to buy a house.  The homeowner would sign a promissory note promising to pay the money back to the bank.  The homeowner also signed a mortgage, giving the bank the right to foreclose and take the house back if the homeowner did not pay back the money.

Mortgage Follows the Note

Lawyers and judges grew up with the legal doctrine that the “mortgage follows the Note.” Simply put, if the note was transferred from one bank to another the mortgage would follow the transfer.

But that was then, this is now.

At some point, the folks who brought you this mess  (i.e. overly ambitious bankers on Wall Street) had the “great idea” of slicing and dicing the interest of the Note and literally severing it from the Mortgage. Why this was done was actually for a matter of convenience, expediency, and, arguably, greed. Such motivations for now are secondary to the crisis we are experiencing.

Humpty Dumpty = Mortgage and the Note

But this is clear:  If you think of Humpty Dumpty as the Mortgage and Note, and you break it apart (as what occurred on Wall Street), when the Notes were broken into pieces and the mortgages were assigned to Mortgage Electronic Recording System (MERS), the fact is that it may well be nearly impossible to bring the mortgages and their corresponding Notes all back together again. Plain and simple!

Banks Under Siege

This is why the banks are now under siege. Banks are accused of fraud and perjury in trying to put the Note and mortgage back together. In fact, The New York Times is running Foreclosures Slow as Document Flaws Emerge today as its lead story. The Sun Sentinel quotes Nova law professor, Robert Jarvis (an old Bronx Science classmate of mine) who stated that this problem is now too large for the courts to handle and that the federal government or the banking industry itself will have to step in.

Following Chase’s Lead – Sun Sentinel Cover Story by Harriet Johnson Brackey

I spoke with Harriet about this yesterday and now it is today’s cover story.

Weston attorney Roy Oppenheim says the state Supreme Court’s decision to spend millions to speed up foreclosure cases is ultimately going to slow down the whole process.

“It’s going to backfire on everyone who thought they could ramrod these foreclosures through while denying people due process,” he said.

And it will!

Title Insurance Companies Stop Insuring

Adding insult to injury, some title underwriters are now not willing to insure any real property where GMAC foreclosed. That means if you recently purchased a home just pray you have title insurance because you have a huge claim looming. You will not be able to resell or refinance your property for a long time.

So… while some of us have warned for some time that many of the banks are really not “good” eggs,  Chicken Little has come home to roost.

“All the kings horses and all the kings men will not be able to put Humpty Dumpty back together again.”

Oppenheim continues to help Florida homeowners learn more about developing stories concerning bank fraud and will focus on this subject in his monthly foreclosure defense workshop on Wednesday October 6 at 6pm.

Roy Oppenheim of Oppenheim Law says the three Florida foreclosure stories on this investigative report by CBS4 Stephen Stock are the rule rather than the exception. There seems to be a disconnect with the banks and some are calling it FRAUD.

“This is the tip of a very ugly iceberg and the banking ship is now sinking,” says Oppenheim.

Oppenheim continues to help Florida homeowners learn more about developing stories concerning bank fraud and will focus on this subject in his monthly foreclosure defense workshop on Wednesday October 6 at 6pm. The full CBS story is live on the Roy Oppenheim YouTube Channel.

Maybe its is just me, but what I am seeing over and over again during these turbulent economic times is a general sense of a lack of personal responsibility. It is truly becoming a sign of the times and until we figure out how to properly correct it, our very foundation will be continuously questioned if not threatened.

The examples are now running amuck.

AIDS at the VA

First we hear this past week about the VA literally spreading AIDS in a VA hospital in Miami and elsewhere by not properly cleaning certain “sensitive” equipment used in colonoscopies. Hello!! Are they STUPID? Would we ever hear of such an idiotic situation at a private facility where the Dr. and his partners would lose their license and be sued to the moon if this happened? No! Of course not, but at the VA no one will ever be held personally accountable.

In fact if the person who received AIDS is still on active duty he may not even be allowed to sue the VA. But even if the innocent victims do sue, who will actually be paying the damages: you and me the taxpayer. Not the manager of the facility, or the person responsible for cleaning the tubes. Certainly the President won’t ask the Secretary of the VA to step down because it wasn’t “his fault.” Well whose fault was it is the real question and how do we create a system that prevents these kinds of unbelievable mistakes? I am not sure but the list continues.

JPMorgan and Madoff

The NYT on Saturday reported that a Florida latecomer to Madoff’s investment scheme sued JPMorgan Chase in NY because as the bank that handled Madoff’s checking account they knew or should have known that something was wrong in late October 2008 when billions of dollars kept rapidly flowing in out of certain Madoff accounts. In Fact, the bank now acknowledges that it indeed removed $250 million from a Madoff feeder fund around the same time. So in other words while JPMorgan Chase continued to enjoy the revenue it earned from helping Madoff facilitate his operation, they themselves took $250 million off the table.

Thus, maybe just maybe with this new lawsuit we are starting to see a glimmer of the application of the doctrine of enterprise liability. It is a legal construct that lets courts look at an entire enterprise regardless of various subsidiaries and divisions and say “as an enterprise you committed, fraud, a tort or negligence by hurting someone else and thus must be held accountable.” A well-known example of its application is in the 80’s against Union Carbide. The parent company was held responsible for a terrible accident that killed scores of people at a facility in Bhopal, India that one of its subsidiaries ran or managed even though the parent company had no day-today responsibility concerning the plant’s operation.

Naturally, JPMorgan denies it is not responsible for the loss of the investor’s money with Madoff. Would we expect otherwise? But then why did JPMorgan Chase decide to move $250 million out of its own investments with Madoff? Should they not be held accountable for sleeping at the switch yet benefiting from their own knowledge? We will see… won’t we?

Foreclosure Crisis

So, how does enterprise liability relate to mortgage foreclosures?? The answer is simple. Can the same banking enterprises that know it is accepting liar loans, no income verification loans, offering mortgage brokers incentives to ensure that borrowers would be enticed to initially take a loan with certain terms even though it was obvious that soon the borrower would be unable to make the payments, and then reselling such loans as graded securities to unsuspecting investors around the world, yet buying insurance products should the loans fail, be held accountable for creating a house of cards that would take down the entire economy and require each family in the US to spend about $350,0000 to bail out the system? Some folks are saying it is impossible to hold any organization to that standard.

I say if we permit these trillion dollar organizations to dominate our lives without the notion of personal responsibility and accountability we are all doomed. These large trans-national organizations and their employees are permitted to take risks that no one individual would ever do if they knew they would lose their house or personal net worth. Yet these “too big to fail” enterprises” knew if they took the risk and failed they would have our government and economy by the short hairs and could demand a bail-out for if they didn’t get it, they would take us all down with them. That is not what I call personal responsibility. I call that extortion or blackmail- plain and simple.

And let’s not forget what happens to these poor folks who made these bad decisions. They still got to keep all their bonuses. Maybe a few lost their jobs, but they assume no responsibility. They maybe have to get a new job or career, but they are not being sued, not being chased by debt collectors, not having their credit scores destroyed like the folks who were mislead by over zealous mortgage brokers. Nothing, nada. In fact, some will end of working for the government either for the Department of Treasury or the FDIC under the premise that they understand the system. Boy do they!