The Mortgage Expert Witness

Suit by Illinois AG Claims Credit Rating Agency Ignored Risks of Bundled Mortgages

mortgageforensics — Thu, 26 Jan 2012 17:34:52 +0000

llinois Attorney General Lisa Madigan claims in a lawsuit filed on Wednesday that Standard & Poor’s gave high ratings to mortgage-backed securities while ignoring the risks of the investments.

Madigan accuses the company of bolstering ratings to retain clients and generate revenue, report the Chicago-Sun-Times and the Associated Press.

The suit refers to employee emails showing a low opinion of the rating system. One employee says in an instant message that investments “could be structured by cows and we would rate it.”

“The mortgage-backed securities that helped our market soar—and ultimately crash—could not have been purchased by most investors without S&P’s seal of approval,” Madigan said in a statement.

An S&P spokesman said the suit is without merit.

(By Debra Cassens Weiss)

Four lawyers and their marketing firms Shut Down

mortgageforensics — Mon, 12 Sep 2011 22:47:02 +0000

By Nancy McCarthy

The State Bar of California and Attorney General Kamala Harris last month shut down the operations of several lawyers and marketing firms that have targeted distressed homeowners, urging them through false advertising to sue their mortgage lenders. The bar and the Department of Justice won court orders either assuming jurisdiction over several lawyers’ practices or imposing temporary injunctions against the marketing companies. Read more…

Homeowners Can Sue Banks for Fraud Over Broken Loan Modification Promises

mortgageforensics — Tue, 12 Jul 2011 22:25:44 +0000

By Nick Alden, Esq.

The Second District Court of Appeals in Los Angeles has ruled that banks are “legally bound by their loan modification promises,” and can be sued for fraud when homeowners rely on such promises and are damaged as a result.

Did I already say that it’s about damn time? Well, it totally is.

Claudia Aceves received a foreclosure notice from U.S. Bank, so she filed for bankruptcy protection and the foreclosure was halted. Her plan was to file Chapter 13, which would mean that she could very likely keep her home and under a court approved repayment plan.

Then she got a call from the nice folks at U.S. Bank… and the bank’s representative said… I’m paraphrasing here…

“Oh, Claudia, Claudia, Claudia… this is all just one big misunderstanding. You don’t need to trouble yourself with the whole bankruptcy thing. We’d be happy to help you get your loan reinstated and modified… assuming, of course, you wouldn’t mind just withdrawing your bankruptcy filing.”

So, she did. Read more…

Mortgage Lending: Art or Science?

mortgageforensics — Sun, 12 Jun 2011 19:05:53 +0000

Question: I’ve partnered with 2 commercial real estate brokers and the owner of a title company to start a commercial mortgage company. We are well-capitalized, and with our experience in the field we feel that this is a natural extension of our talents. At the same time, we are fully aware that thousands of similar companies have gone under in the past 4 years.

Answer: Lending is a science in which most of the variables can be easily quantified. As long as you treat lending as a science, your chances of coming ahead on each transaction are quite favorable; it is when lenders treat lending as an art that the chances to fail are multiplied. Think of the subprime fiasco: some lenders survived it quite nicely, by insisting on low LTVs and verifiable income and credit. Others were enchanted by the the art of hocus-pocus which had ensnared the secondary market, and forgot what their business was all about. They are the ones who were wiped out.

Eric Forster

Sans Declaration, Expert is Disqualified By Federal Court

mortgageforensics — Sat, 21 May 2011 19:45:42 +0000

In this Nevada case, a lender sued for a deficiency judgment having foreclosed on a trust deed. The defendant (homeowner) countersued.

On the last day of discovery, Defendant/Counterclaimant disclosed “Rebuttal Witnesses” Kent Vollmer, a real estate appraiser, and Dr. Charles Jackson, MD. However, he failed to comply with the provisions of Fed. R. Civ. P. 26, in that he did not disclose any written report or a summary of the facts and opinions to which either witness was expected to testify. This failure, said the court, causes great prejudice to Plaintiff, who had no opportunity to take the depositions of the proposed rebuttal experts, and has no means by which to prepare for their testimony, or to prepare witnesses for their testimony. Read more..

Federal Licensing For Mortgage Expert Witnesses?

mortgageforensics — Sat, 05 Mar 2011 23:39:49 +0000

As of last year, loan originators, processors and underwriters must qualify for the federal NMLS license. In addition to passing state and federal exams, licensees must pass FBI background checks designed to weed out many of those who took active part in the mortgage industry meltdown of the past few years.

Should mortgage experts be NMLS licensees (or more to the point, can a non-licensee be considered to be an expert)? In future posts we’ll elicit some pro and con opinions.

Eric Forster

The Prevailing Party Cannot Recover Expert Witness Fees

mortgageforensics — Fri, 25 Feb 2011 05:16:56 +0000

The Trattman v. Key case in Los Angeles involves competing claims to ownership of 11 real properties. Garrison Key and Dieter Trattmann were equal partners in a real estate acquisition and management joint venture when Key persuaded Trattmann to sign deeds transferring to Key the 11 properties previously held in Trattmann’s name alone. Eighteen months later, Key recorded the deeds. Trattmann maintains that he was the legal and beneficial owner of all the properties, he did not intend to transfer title to Key when he signed the deeds, and Key recorded the deeds without Trattmann’s knowledge or consent and in violation of a promise not to record unless Trattmann died.

Trattmann filed this action seeking, among other things, to cancel the deeds, quiet title, damages for fraud and breach of fiduciary duty, and an accounting. In a cross-complaint for, among other things, quiet title, fraud and an accounting, Key maintained that he has always had beneficial interest in the properties, and that it was Trattmann who held the properties in trust for Key. Following a nonjury trial, Trattmann prevailed on his cancellation of deed, quiet title, fraud and breach of fiduciary duty causes of action and on the cross-complaint.^[1] Both parties appealed.

Key contended the trial court erred (1) in canceling the deeds; (2) applying the unclean hands doctrine to deny him any interest in two of the 11 properties; (3) not requiring Trattmann to account for certain joint venture assets; (4) awarding money damages to Trattmann; (5) awarding receiver’s fees and costs against Key; and (6) denying Key the right to enforce a prejudgment cost order against Trattmann. In his cross-appeal, Trattmann contended the trial court erred in denying punitive damages.

The Appellate Court modified the judgment to strike the award of expert witness costs, reverse and remand for further trial on punitive damages, and otherwise affirmed the trial court’s verdict. Read more…

When Appraisal Expert Witnesses Disagree on Value, The Court Decides

mortgageforensics — Mon, 27 Dec 2010 00:41:17 +0000

Robert and Debra Weichey reside in a 1½ story log cabin home located on a 1.31 acre lot. It has 7 rooms, including 3 bedrooms and 1 bathroom, and was constructed in 2005. The house is the primary asset listed in the couple’s bankruptcy filing. NexTier Bank holds a second mortgage on the Weichey’s residence, with a secured position behind the first mortgage of U.S. Bank which filed a proof of claim in the amount of $186,182.62 in the main bankruptcy case.

NexTier filed a proof of claim in the amount of $31,991.66. In this Adversary Proceeding the Debtors asked the Court to find, pursuant to 11 U.S.C. § 506(a), that NexTier’s claim was entirely unsecured because the value of the residence is less than the U.S. Bank claim. NexTier answered the Complaint by disputing the Debtors’ contention as to the value of the residence, asserting that its claim is entirely secured. After an opportunity for discovery, the Parties advised the Court that the only issue necessary for decision pertained to the value of the Subject Property, and hired appraisers to determine the value of the log cabin. The Weichey’s appraiser determined the value at $155,000, while the bank’s appraiser though the value was $224,000. Read more…

Failure to Show Witness’s Unavailability Results in Exclusion of Testimony

mortgageforensics — Thu, 07 Oct 2010 16:28:12 +0000

By Sara E. Costello, ABA Litigation News Associate Editor – September 17, 2010

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A recent decision [PDF] by the U.S. Court of Appeals for the First Circuit reminds all attorneys that they must satisfy a “relatively high” standard when seeking to introduce a statement from a witness that is not available to testify.

A “Relatively High” Standard
In United States v. Weekes, the First Circuit upheld the district court’s decision to exclude key testimony in a criminal case because only minimal efforts were made to procure a witness’s attendance at trial. The First Circuit’s opinion, written by Justice David H. Souter, former associate justice of the U.S. Supreme Court, examined Weekes’s conviction.

Shortly before his arrest, Weekes and Kelvin Brown argued with another customer at a bar and were thrown out. Gunshots were then heard coming from their direction. The security guard at the bar, an off duty police officer, pursued Weekes and Brown. Weekes was arrested immediately after trying to jump a fence. The police found Weekes’s cell phone and a loaded gun near where he landed along with two spent shell casings. Read more…

Expert Witness Need Not Be An Expert, Says Court

mortgageforensics — Thu, 16 Sep 2010 18:30:48 +0000

Vernon Cooks Jr. was convicted of being the mastermind behind an ingenious but misguided scheme to cheat mortgage lenders by fraudulently obtaining house mortgage loans. In most of the accused transactions the documentary evidence and trial testimony show that Cooks followed the same basic pattern. For each transaction, Cooks first recruited an inexperienced real estate investor to serve as the nominal owner of the house, a so-called “straw purchaser.” When Cooks found a house for sale, he then contracted with its owner to buy it. At the same time, Cooks entered into a contract to sell the same house to the straw purchaser for a much higher price. Cooks worked with one of two mortgage brokers, Abdul Karriem (“Karriem”) and Deirdre Anderson (“Anderson”), to handle the mortgage loan process for each straw purchaser.

The jury convicted Cooks on all charges. The district court sentenced Cooks to 135 months’ imprisonment, nearly one and one half million dollars in restitution, and a five-year term of supervised release.

In his appeal, Cooks contended that the district court erred by admitting the expert testimony of a Government witness. Cooks argues that the expert, Agent Steve Overby (“Overby”) of the Federal Deposit Insurance Company, was not qualified to give expert testimony on the subject of mortgage fraud because he lacked sufficient experience. Read more…