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Fortune Magazine Investigation Finds Major Flaws in Securitized Countrywide Loans

June 13, 2011

One issue that's gotten less attention as the housing crisis progresses is securitized loans. Our Riverside foreclosure defense lawyers heard a lot about mortgage securitization being a holdup when the market first crashed, but lately, media coverage hasn't given securitization any special attention. So we were very interested to see a June 3 post from Fortune magazine's Term Sheet blog examining the issue of whether the paperwork is in order in securities backed by Countrywide Financial mortgages. Countrywide has been implicated for robo-signing and other shoddy paperwork practices in testimony from a former employee, but new owner Bank of America has denied this. However, Fortune did a small investigation of its own -- and found that none of the Countrywide mortgages it examined had been properly endorsed.

In order to legally securitize a mortgage, lenders have to endorse the note -- essentially, sign ownership over to the trustee in control of the security. Fortune pulled public foreclosure records filed in the Bronx and Westchester County, N.Y. between 2006 and 2010. Of the 104 securitized loans it found that were originated by Countrywide, Fortune said, zero of them had been endorsed over to the securitization trust by Countrywide. Of loans originated by other lenders, two-thirds also lacked an endorsement. The findings match the testimony of the Countrywide ex-employee, who said she'd never seen an endorsement in 10 years at the lender. They also back up numerous real-life plaintiffs who have been increasingly suing over paperwork that doesn't show ownership of the loans or has clearly been fabricated after a challenge.

As Dana Point foreclosure defense attorneys, we know the sample of loans in this investigation is small -- but we suspect it's just the tip of the iceberg. In the wake of robo-signing, courts have increasingly demanded that lenders show ownership of the mortgage before permitting a foreclosure. And more borrowers are taking advantage of this heightened scrutiny to demand that lenders show a valid note. In some cases, the paperwork problems are so severe or the falsification so obvious that courts dismiss the foreclosures. This strategy increasingly works because lenders have submitted so much false paperwork, so many obvious forgeries and false testimony that judges are on alert for deception. Like everyone else, judges dislike being lied to, and they have the ultimate decision in foreclosures that go to court.

If you're in danger of a foreclosure that you believe you could avoid, call Howard Law right away to talk to us about your legal options. Here in California, foreclosures never go to court; in fact, they can go through without any human being outside the lender verifying that the information is true. That's why California borrowers who feel their rights were violated must sue to get their cases into court. Our Long Beach foreclosure defense lawyers represent clients who are suing over violations of HAMP rules, violations of California and federal predatory lending laws and other severe negligence by loan servicers that threatens their homes. Among other things, California requires borrowers to discuss alternatives to foreclosure before foreclosing, and we see many clients who complain that they heard nothing before they received a foreclosure notice.

Howard Law offers free, confidential case evaluations, so you can talk to us about your rights and your case at no further risk. To set up a meeting, call us toll-free at 1-800-872-5925 or send us a message online today.