Ameriquest originated a mortage, securitized it, and sold it. Then pretended it still owned the mortgage to a U.S. Bankruptcy Court judge. Whoops.
Unamused, Massachussetts U.S. District Court Judge William Young upheld $275,000 in sanctions against Ameriquest and its lawyers (PDF). This quote from the bankruptcy judge speaks volumes: “It is worth repeating as a warning to lenders and servicers that the rules of this Court apply to them.”
Much of the financial services industry apparently forgot, in the heady years of a booming economy, that they had to play by the rules. But they do. Paperwork and proof matter, especially when it comes to taking a home. Just because Ameriquest and its ilk have been securitizing—essentially a convoluted sale supposed to allow investors to shoulder profit and loss—their loans for years, that does not mean their intentions will hold up in a federal court.
Judge Young resorted to an Oscar Wilde quotation and a Thomas Nast cartoon to express his disgust at the conduct of Ameriquest and its lawyers, who apparently thought otherwise. As it turned out, Ameriquests’s law firm had already tried to foreclose the loan—for Wells Fargo, and Ameriquest had given away all its important right in the securitization.
This ought to be a forceful reminder to the lending industry of why it matters who can produce the note.
$275,000 Sanctions in Mortgage Shell Game [Consumer Law & Policy Blog]
Sam Glover is a consumer rights lawyer, enemy of shady debt collectors, previous Consumerist contributor, and writes the Caveat Emptor blog. His column appears the first Monday of every month on Consumerist.
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Just more corrupt bullshit in the banking.. make that _______ sector. It will never end.
Holy jumping pigflesh. That is a truly gigantic sanctions award, even considering that this is federal court.
Go read the order for the full effect of why the judge is hatin’ here. Ameriquest did not tell the court that it was not the holder of the mortgage until AFTER a proceeding in bankruptcy court, where they lost and were subject to punitive damages.
If you’re about to be foreclosed on– ask them to produce the paper to prove it. Dave Ramsey has even given this advice. Worst case they produce it. Best case you buy yourself time.
@JGKojak: The same is true of credit card debt. We’ve had several cases filed, in the court where I work, attempt to collect on credit card debts where the defendant actually appeared and filed an answer. In those instances the cases end up being dismissed because it’s impossible to show any real paper trail. But even worse, or better, depending how you look at it, those companies never have any proof of a signed agreement.
They’re filed in the hopes that the cases will end in default, so the issue of the lack of proof will never have to be raised.
@JGKojak: They did produce documents showing they owned the loan when they were foreclosing on it. Problem is they neglected to include the subsequent documents that showed they had assigned it.
this is one reason that the section of lending disclosure on my soon to be mortgage from my credit union includes the bit about them having no intention to sell my loan. doesn’t mean something won’t happen, but it reassures me that it’s less likely to
@catastrophegirl – manic first time home buyer:
When my parents refinanced their mortgage, one of the things that helped them pick the bank they ultimately went with (Hudson City Savings Bank for those curious) was that it kept all of its mortgages in house.
@catastrophegirl – manic first time home buyer: If the lender itself goes into bankruptcy, the loans will be sold to help pay off the creditors. Be sure your loan has terms specifying a location of servicing (e.g. at or within XX miles thereof) so you have a place to go pay in person with cash at the last minute if you ever have to.
@Skaperen: well it’s the state employee’s credit union. it’s one of the most stable institutions in the state right now. but it’s a 30 year mortgage……
@catastrophegirl – manic first time home buyer: Same thing with Homestreet Bank in Seattle and Portland.
That was a well written, joy to read decision… Well done Judge William Young.
@GreatWhiteNorth: Yeah, I’m actually filing that one away to use in class when we talk about the US court system. Very clear and easy to follow, good intro for my students who’ve never seen a court decision.
Now the question is: How many foreclosures should not have happened? And now that this decision has occured, how many people are going to get to stay in a house because the paper trail has eroded to the point noone can assert a claim?
Could get more interesting, especially since the sleight of hand from the banking industry is coming back to bite them.
@SacraBos: Truth. On all accounts.
I don’t condone people not paying their bills but it is very funny to me that the loan servicing industry and the financial industry as a whole has been pulling this crap for years and it is now gonna bite them square in the ass.
@SacraBos:
I don’t think that’s the question at all, unless you mean did the party filing the foreclosure have legal standing to actually file?
I can tell you that no servicer just randomly files a foreclosure, it’s only after the borrower has failed to pay for some time.
It’s the trail of assignments that is the issue with most foreclosures in the news these days. Without that trail, you cannot establish who owns the note. If you cannot prove that you are working for the entity that owns the note, you do not have standing to file foreclosure proceedings.
The current governor of Mass, Deval Patrick, was on the board of Ameriquest’s parent company and got wealthy knowing that they were engaged in predatory loan practices against the poor, elderly, and minorities. It’s fortunate that this was heard in federal court and not state court.
@cmdrsass: (not that it would be heard elsewhere, just sayin’)
This kind of thing also happens in debt collections. Creditors and collectors keep trying to collect accounts they’ve already sold, or even try to collect accounts they haven’t even bought, yet. In the latter case, they file suit on accounts they are merely reviewing to buy, and will buy it if they succeed in getting a default judgment (if no one shows up in court, no one is there to demand proof of standing to sue, and too many courts just let them do this).
Everyone needs to be tracking every detail of their business affairs. Never assume any bank or other business will do it right. In some cases it’s outright fraud. In perhaps most others it’s just incompetence in record keeping or poorly designed software.
Any notion of “responsibility” that businesses seem to expect of people is entirely non-existent in the executives and management of 99% of businesses.
@Skaperen: Reminds me of a letter I got from the IRS saying that I underpaid my taxes by $2k.
What I really loved was the paragraph saying that if Isimply signed the form and paid the money, I would not be able to get it back if there was an error as I would forfeit my right to trial.
But I did have the right to trail if they realized that I owed even more. Thank God I realized it was a mistake and sorted it out.
Stay on top of your business, there are more than a few people that will take advantage of your ignorance.
watch ‘em try and appeal.
you just know they will…
@KhaiJB: That was an appeal. They will probably appeal it again, and again, until Scotus turns them down.
During the good times I think fewer people were questioning what was going on because fewer people were having financial issues. This kind of behavior has been rampant throughout business sectors.
I am still mucking through medical bills with obviously fraudulent or undocumented charges. Not to mention my adventure in having to counter sue a business that I had paid off long before but couldn’t get their records straight.
Judges need to be more willing to put punitive damages on these companies for wasting people’s time and the court’s time. Judges also need to make it standard practice that the supposed mortgage holder must produce the note before they can take any action.
@bohemian: And everyone needs to be also aware NOT to sign off on contracts with mandatory binding arbitration…
This is interesting to me. Ameriquest essentially ceased to operate as a company over two years ago. The majority of their business model rested upon bundling and reselling loans to investors (Wells Fargo in this case). It’s mind-numbing to me that they would try something this absurd, even after mostly closing down. Seems to me the Ameriquest timeline looks something like this:
- Start selling mortgages
- Make a ton of money and grow crazy fast using questionable practices
- Get hit by major lawsuits
- Decide that they need to clean up their act, shut down all branches (laying off thousands), and move to a centralized model with actual oversight
- Limp along for about a year
- Realize that a) doing it the right way isn’t very profitable for them, and b) they can’t outrun the crimes of their past
- Shut down all operations (laying off thousands more)
- Engage in shady legal practices to try to make more money from foreclosing homes (?)
I was working at Ameriquest the day they layed off everyone (save a handful, like a couple dozen) and closed down their operations. It was insane.
@dangerp: Did anyone get five finger severance payouts? Like laptops, servers, company cars,etc?
the picture made me laugh.
“I never broke the law, I AM THE LAW”
Much more than $250K in sanctions, I read the judge’s PDF and a whole bunch of people are out lots of money ranging from $25,000 to $250,000. Interesting read.
@chrisdag: Did you make it to the end? The damages against Wells Fargo and Ameriquest’s internal council were vacated.