Federal Judge Compels Nationstar To Produce (False) Modification / Accounting Records
Over the past couple of years, having investigated cases involving “Nationstar” as servicer in various cases throughout the country, a pattern has developed involving “Capitalization Modifications” on loans without borrowers’ knowledge or consent. Before I detail some of this evidence, here is a description of “Loan Modification and Refinance Fraud” and “Mortgage Servicing Fraud” provided at www.FFIEC.gov.
Per the Federal Financial Institutions Fraud Investigations Symposium’s 2009 “White Paper” titled, “The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: A White Paper,” (See: https://www.ffiec.gov/exam/mtg_fraud_wp_feb2010.pdf) the following is provided on P.27:
“Loan Modification and Refinance Fraud
With respect to any mortgage loan, a loan modification3 is a revision to the contractual payment terms of the related mortgage note, agreed to by the servicer and borrower, including, without limitation, the following:
- Capitalization of any amounts owed by adding such amount to the outstanding principal balance.
________________________________________________________
3 American Securitization Forum: Recommended Definitions and Investor Reporting Standards for Modifications of Securitized Residential Mortgage Loans, December 2007″
P.31:
“Mortgage Servicing Fraud
Mortgage servicing typically includes, but is not limited to, billing the borrower; collecting principal, interest, and escrow payments; management of escrow accounts; disbursing funds from the escrow account to pay taxes and insurance premiums; and forwarding funds to an owner or investor (if the loan has been sold in the secondary market). A mortgage service provider is typically paid on a fee basis. Mortgage servicing can be performed by a financial institution or outsourced to a third party servicer or sub-servicer.
Mortgage servicing fraud generally involves the diversion or misuse of principal and interest payments, loan prepayments, and/or escrow funds for the benefit of the service provider.”
Recently, I conducted an investigation for a client in Michigan which revealed that the servicer (Nationstar) was reporting to the investors of a REMIC trust that the loan/debt received a “Capitalization Modification” in the midst of foreclosure proceedings, and just prior to the Sheriff’s Sale of the property. (This isn’t the first time I have uncovered this fact pattern.) This was news to the client, as she was never aware or privy to any such modification. With my client’s permission, the following excerpts are from my report:
“Attached within the loan level data zip File is a file titled “.MOD” which reveals the details of the modification as follows:
Modified Loan amount – $177,466.94
Loan Status – Current
Effective distribution Date – 03/25/2014
Capitalization – Y – (“Yes”)
Scheduled Balance = $180,134.10
Actual Balance – $180,400.81
Pre-Mod P&I – 963.46
Post-Mod P&I – $1,016.74
Capitalization amount – $2,667.11
These numbers are clearly inconsistent with the amounts declared in the default notices. In the Notice of Sale recorded on July 10, 2013, the amount declared as “unpaid” was “$251,943.71.” This is approx. $72k more than the amount shown internally a year later. The data shows that the loan/debt balance was in decline at the time of the Notice, and thus there was no default to the certificateholders of the FHAMS 2006-FA4 Trust. The monthly remittance report file for July 2013 (.REM1307) shows a “Beginning Balance of $170,259.75” and “Ending Balance of $170,003.00.”
In addition, the Sheriff’s Deed dated April 2, 2014 states that the Trust was the highest bidder for “269,870.20.” This amount was approx. $100k more than the balance owed to the certificateholders at that time. The Covenant Deed issued on December 17, 2014 to “[REDACTED]” states that this party paid “$108,150.00” for the purchase of the property. No such payments in either the Sheriff’s Deed or Covenant Deed are reflected in the remittance reports for the subject loan. In fact, attached within the loan level data is the “Loss File” titled “.LOS.” This filed shows the loan/debt was “paid off” on 01/25/2015 in the amount of “$180,400.80.” This number does not match-up with the deeds. This file shows continued amounts being applied to the loan/debt each month after the sale which means the account remained active after the sale right up until June 2016.”
As a result of these findings, a Motion to Compel was filed and granted on behalf of my client. (See: ecf143-order-on-mot-compel-modification-advances-by-nationstar) Per the Order:
“IT IS HEREBY ORDERED that defendant shall produce remittance reports as to the two loans in question only, limited to the time period when Nationstar was acting as servicer on those loans, within 28 days of the date of this order.
IT IS FURTHER ORDERED that defendant will provide complete answers as described on the record to Interrogatory Nos. 6 and 7 within 28 days of the date of this order.
IT IS FURTHER ORDERED that defendant will produce copies of unredacted and redacted documents provided to plaintiff within seven days to determine whether attorney/client and/or attorney work product privileges were properly claimed.”
Here’s the Discovery Requests referred to in the Order. (See: discovery-requests-motion-to-compel-michigan-craigie)
There appear to be many layers to this servicing fraud scheme, one of which is the likely collection of modification stipends from the federal government for each reported modification. In this subject case, the borrower had no knowledge of any “Capitalization Modification” while the investors likely had no knowledge of any default by the borrower due to the advance payments and the reporting of the modification. After all, just prior to the Sheriff’s Sale, the loan was reporting as “current.”
This is why it is very important to have an investigation conducted to see what exactly is being reported in the internal loan level data to the investors. If these “false modifications” by Nationstar were legally on the “up and up,” there shouldn’t be this type of push-back.
Stay tuned for Nationstar’s response.
Bill Paatalo – Private Investigator – OR PSID#49411
BP Investigative Agency
Bill.bpia@gmail.com
3 Responsesto “Federal Judge Compels Nationstar To Produce (False) Modification / Accounting Records”
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I have federally insured hecm signed 5/2006. My loan instr state property taxes/ins are obligatory cash advances by lender.However in 7/25/16 a trustee sale was held and reverse mortgage funding llc took credit bid.From monthly statements champion and rev Mort fund are same entity and champion was assigned dot from b of a in 7/2012
Continued…but no one assigned anything to b of a prior originator is Seattle Mort. Co.and 2nd dot to HUD then to Seattle savings bank in 7/2006.in 3/11/16 subst. Trustee from champion/nationstar to title trust deed SVC co and assign dot fromseattle savings bank timers and b of a then 5/16 assign dot from champion/natstar to rev Mort fund then 8/16 trustee deed from title trust deed SVC co to rev mORT fund then warranty deed from rev Mort fund to broad street funding trust 1 who apparently rev Mort fund leases building from broad st in Bloomfield nj.in addition to property exp being obl by lender I signed dir withdrawal from checking for over $8800 in 18 months and all cash advanced was added to loan balance. Also forced placed ins was 2 separate policies for 2 separate coverage amounts and for 2 sep. Loan numbers diff than mine one pol. Was cancelled due to loan paid off dated 24 days before trustee sale.also my prop taxes were paid/redeemed by Obama senior citizen tax program not paid by any lender/servicer. Also I have statements for both loan #’s and obviously same debt. My principle limit is to increase monthly and that increase was added to loan balance but not avail.to me my max claim is $544,185 and appr.for$400,000 but after initial $194,000 at closing no more funds avail after 93% of max claim my rev Mort supposed to be assigned to HUD who was to take over terms and pay off lender but cut off at $194000 with interest making it $212000. And principle increase to $274000 otst loan balance I never rec a dime after closing in 2006 yet foreclosed on undisclosed loan number I see 3 liabilities and 1 debt many other questionable/fraudulent practices in all phases help ud plaintiff is rev Mort fund but rec title is broadstreet yet judge denied motion to quash for no cause of action not real party in interest help
Great job you are doing. Neil Garfield certainly thinks highly of you and he is great. If you know any really good people in Colorado please advise. The latest ruling by the 10th Circuit Court against Urban and nasty old B of A was a real surprise!! Have been fighting nasty old B of A for five years on the initial five loans I had that were supposedly originated and funded by Countrywide Home Loans. I have all the undisputed proof of the phony, forged, fabricated docs involved all this time, but the state of Colorado and Fannie Mae are apparently BOTH in on all the RACKETEERING and Fraud, along with all our phony congress people. Sure proud of the great state of Montana and their total stance against B of A in the Morrow Case. Keep up the great work and Semper Fi.
Fred R. Schneider