Accusations of Fraudulent Mortgage Documents Led Citigroup to Settle With Homeowners
In a handful of cases around the country, Citigroup has reached settlements with homeowners who accused the bank of filing fraudulent mortgage documents to prove its legal standing to collect the debt in bankruptcy proceedings, Bloomberg reported today.
The cases put a twist on recent efforts by banks to patch over problems created because lenders and securitizers were sloppy with documentation during the housing bubble. These homeowners alleged that Citigroup’s mortgage assignments—a key document produced whenever the ownership of a mortgage changed hands—were flawed because they were dated after the bankruptcy was filed.
Mortgage assignments, as we’ve noted, are sometimes processed in-house by mortgage servicers, but they may also be contracted out to companies, in this case a Texas company called Orion Financial Group. (Orion has not been accused of wrongdoing but told Bloomberg it does not “create fraudulent documents.”)
In the settlement agreements with homeowners, Citigroup did not admit wrongdoing but agreed to cover their legal costs and slash their interest rates. In a few cases, the bank also reduced the amount outstanding on mortgages. Here’s Bloomberg:
Citigroup paid almost $82,000 in opponents’ legal costs when settling challenges to four bankruptcy claims that used Orion letters in 2010, according to agreements filed with federal bankruptcy courts in New York and Arkansas. The bank reduced interest rates on the remaining debt by an average of 49 percent, while cutting the outstanding mortgage balance in three cases by a combined $55,000, the filings show.
A Citigroup spokesman told Bloomberg that it reaches settlements in cases for “a variety of reasons, usually so both parties can avoid the expense of ongoing litigation.”
The documents from these cases get into some of the technicalities. Take this case in New York, in which Citigroup’s mortgage unit, Citimortgage, filed this proof of claim. Both the promissory note and the mortgage produced were agreements between the borrower, Replique D’Amelio, and the lender, Home Loan Center. Citimortgage also included an assignment of mortgage, dated June 24, 2010, to prove that ownership of the mortgage had been transferred to Citimortgage.
The homeowner’s attorney objected, however, questioning the validity of the mortgage assignment and noting that bankruptcy proceedings had started June 2, 2010—before the supposed transfer of ownership was executed.
“The assignment of mortgage is an attempt to perfect a lien after the commencement of the case and therefore is voidable by this Court,” attorney Linda Tirelli argued in a motion objecting to Citimortgage’s proof of claim.
Rather than produce an original assignment to prove its claim, the company chose to settle. Though the cases cited by Bloomberg took place in bankruptcy courts in New York and Arkansas, they bear similarity to a recent ruling in Massachusetts. In that case, the state’s highest court voided two foreclosures because neither U.S. Bank nor Wells Fargo could produce an original assignment or evidence of an original assignment when it sought to foreclose on two Massachusetts properties.
The Massachusetts court, as we noted, ruled that “confirmatory assignments,” or assignments produced after a foreclosure had been attempted, were insufficient to prove the bank’s legal standing to foreclose unless there was sufficient evidence of an earlier assignment.
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7 comments
Paul bp
Feb. 8, 2011, 2:56 p.m.
I beg to differ with Citigroups statement that they settle cases “usually so both parties can avoid the expense of ongoing litigation”. All of sudden Citigroup has empathy for the other “parties” legal expenses? Bull. Citigroup reaches settlements in cases they know they have no standing in order to spare themselves any embarrassment and negative backlash from the public. Most of all though, so they can avoid using of one of the most feared words in the banking industry - “wrongdoing”.
Susan
Feb. 8, 2011, 6:02 p.m.
Let’s hear it for Mass.!!!!!!!!!!!!!!!!!!
Truebee
Feb. 9, 2011, 9:08 a.m.
To Paul hp and Susan.
Paul, you are correct for the wrong reasons. These banks settle rather than appeal because they know the outcome of an appeal in the Federal Courts,i.e. the law is usually the law. The poor people that settled were foolish because they could have walked away from the mortgage completely by filing a suit to quiet title. The bank would not appeal or even answer such a suit because they would then create yet another “Massachusetts Syndrome” situation.
Susan, you are absolute correct. Appeal of the fraud these bank relied upon in the lower courts usually get looked at properly by the Federal Courts in bankruptcy proceedings and corrected there based upon the law rather than the Bank’ s attorney’s closeness with the judges in the lower courts.
Fortunately, the Massachusetts Supreme Court probably has lifetime tenure and they have respect for the law and about keeping the law, the law, rather than giving into personal greed. Actually in the Massachusetts case, the lower court created the issue by shutting down the fraud at the trial level and the bank walked into the trap and got their head handed to them on appeal. The attorneys handling the Massachusetts litigation should be canonized for not selling out their clients and taking the easy way out.
Too bad all states don’t have the quality Judicial that is apparently afoot in Massachusetts.
Truebee
Feb. 9, 2011, 9:24 a.m.
Some More!
Until such time as the courts start taking attorney’s licenses for fraud and fining the bankers and their represnetatives big money, this garbage will continue.
The banksters are not fools. They have spent 40 years digging into the court system, the legislature and the media, piece by piece, chipping away and individual rights and stacking the courts with former prosecutors, bank lawyers, insurance company lawyers, defeated legislators, and marginal lawyers that couldn’t make a living as advocates in speeding ticket cases, but willing to do whatever was necessary to receive favors and money.
This country, its financial disaster and legislative disaster, didn’t happen by any accident. The courts are in shambles, Washington and State lawmakers on the take just to keep their jobs. It was well planned and well executed. The “Citizen’s United” decision by the US Supreme Court was the last building block needed for complete control. Justice Alieto’s nod in the affirmative during the 2010 State of the Union address, tells it all.
Big Government and Big Business are united.
Coin of the realm talked 4000 years ago and it still talks, maybe even louder.
acmodspecialists
Feb. 9, 2011, 10:26 p.m.
Truebee, And it does not end there, We are also finding now the Banksters doing FRAUDCLOSURES to collect AIG insurance (bail out money) I m sure you have heard of the Banksters doing the following in order to foreclose on a homeowner, many banks cannot even prove they hold the mortgage The Banks are well known of doing Forged notes, lost notes, intentional destruction of notes, unauthorized people signing mortgage assignments or endorsing notes, missing documentation, fraudulently fabricated documents, different plaintiffs foreclosing on the same property, wrongful foreclosures, plaintiffs who do not exist, illegally breaking in to homes and the inability or refusal to provide proof of purchase and/or ownership of the promissory notes.FORGERY, FILING FALSE DOCUMENTS INTO GOVERNMENT RECORDS, EXTORTION, ABUSE OF PROCESS, FRAUD ON THE COURTS, and countless others of CRIMINAL VIOLATIONS
If any individual person would do just one of these above, he will be in Jail, Oh wait ! Is not The “Citizen’s United” decision by the US Supreme Court makes the Corporations as same as people? how come there are not prosecuted in either way? not as a corporation not as a person either, hmmmmmm….
Mel
Feb. 17, 2011, 5:57 a.m.
The banks are taking everything from everyone in this country and “regulators” are just letting it happen. The banks think no one will catch on to whats happening like it’s such an elaborate scheme that will keep on filling their pockets with American citizens money and assets forever. They are committing the same ponzi circus as Madoff, and in fact worked right along side Madoff as well before he finally went to jail. If our government keeps ignoring our pleas to stop these criminals from robbing us blind, the citizens will have no other choice than to stop them ourselves. The unrest in the Middle East must look like a fun time to them or something, and now they are just begging this country to follow suit and take matters into our own hands. How brainless to want their inevitable demise to play out even worse than it already is going to be.
billige staedtereisen
Feb. 18, 2011, 2:28 p.m.
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