Lex Consulting’s mortgage fraud examiners’ project is warning foreclosure attorneys to be extra careful to identify contract breaches and/or tortious conduct or face malpractice or at least disgorgement of fees from their own client. “Only exposure of contract breaches and/or tortious conduct underlying a mortgage transaction provides a sound strategic basis for liberating homeowners from the bondage of mortgage foreclosure,” said Storm Bradford, founder of the project. “Homeowners and attorneys need to understand a promissory note/mortgage/deed of trust is nothing more, nothing less than a contract. Moreover, attorneys need to be extra careful,” he added. “According to several ethics

Illinois. The U.S. Attorney’s Office for the Northern District of Illinois announced that a former South Holland, IL, man, Kenneth Steward, was sentenced to 17 years and six months in federal prison for allegedly directing a $35 million mortgage fraud scheme involving more than 120 residences on Chicago’s south side. The scheme caused various lenders and financial institutions to lose approximately $16 million on mortgage loans that were not repaid by the borrowers or fully recovered through subsequent foreclosure sales, federal law enforcement officials said. The sentence that was imposed is one of the longest ever given to a mortgage fraud defendant in federal court in Chicago, according to officials.

Lender Processing Services is disputing robo-signing allegations recently made against it and its DOCX LLC subsidiary in a lawsuit filed by American Home Mortgage Servicing Inc. related to the surrogate signing practice at DOCX. “As LPS has previously disclosed, when it discovered the practice at DOCX, LPS immediately notified AHMSI of its discovery of the practice; immediately discontinued the practice; and voluntarily reviewed and remediated assignments of mortgage executed by DOCX using this practice,” LPS said. Once it completed the remediation in January 2010, LPS returned the remediated documents to the attorneys who had originally requested them on AHMSI’s behalf, the company said.

The Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators jointly provided input to the Consumer Financial Protection Bureau on defining “larger participants” of a market for other consumer financial products or services. Their first main point was that the CFPB ought to pay close attention to state legal definitions of the market, state jurisdictional coverage, and the overall consumer protection priority of the market. Second, the two agencies suggested that, when deciding how to define what entities are “larger,” the criteria and thresholds ought to be flexible, determined on an industry-by-industry basis, and based on aggregated institutional ownership.

Inside the beltway types have resurrected discussions about a possible broad government refinance initiative to more definitively bring financial relief to large swaths of struggling homeowners. But given the possible costs involved and the bitter partisan wrangling and brinkmanship seen over the latest round of debt ceiling negotiations, political observers see the introduction of yet another government mortgage program as improbable. A year ago, a team of analysts at Keefe Bruyette & Woods led by Bose George thought talk of a broad-based government refi program would ultimately go nowhere. They still do.

The exact nature of the role of Mortgage Electronic Registration Systems in foreclosure proceedings may well be decided once and for all, as the U.S. Supreme Court has been petitioned for an expanded review of a decision that upheld the rights of MERS to the deed of trust, giving MERS the right to foreclose. Jose Gomes, petitioner, v. Countrywide Home Loans, Inc., et al. is the first major MERS case to reach the Supreme Court. “This will be the first case in the country to petition the nation’s highest court regarding the foreclosure fraud that has taken place, though its emphasis will be specifically on California law,” said San Diego-based foreclosure attorney Ehud Gersten, who petitioned the high court on behalf of his client, borrower Jose Gomes, in his dispute with his servicer, Countrywide.

Department of Housing and Urban Development Secretary Shaun Donovan said it was just “a matter of weeks” until there would be a settlement between federal and state agencies and much of the mortgage servicing industry over foreclosure practices in the aftermath of the “robo-signing” scandal. That was almost three months ago. Recent indications suggest the coalition of government agencies involved in the effort may be fraying. Last week, Iowa Attorney General Tom Miller, who is leading negotiations with the industry, suddenly dumped New York Attorney General Eric Schneiderman from the coalition’s executive committee, claiming the NY AG had “actively worked to undermine” the group’s efforts recently.

Officials with Bank of America maintain that a proposed $8.5 billion settlement related to non-agency buybacks and servicing is fair, even as opposition continues to mount. BofA also continues to take action to distance itself from “legacy” assets acquired from Countrywide Financial. “Obviously there aren’t many days when I get up and think positively about the Countrywide transaction in 2008,” BofA’s CEO Brian Moynihan said this month in a conference call with investors. “In each quarter, we continue to put risk behind us ...

Bank of America and Wells Fargo continued to be the dominant FHA mortgage servicers in a market continuously plagued by high default rates. As of the 2011 midyear mark, the megabanks held 3.86 million in FHA-insured loans in their combined portfolios, giving them a commanding 54.9 percent share of the FHA servicing market, according to Inside FHA Lending’s latest analysis of Neighborhood Watch data. Including BofA and Wells Fargo, the top 50 FHA servicers accounted for 97.3 percent of the market or a total of 6.83 million FHA loans as of June 30. The total for FHA servicing was 7.02 million over the six-month period. The percentage of FHA loans that were 30-60 days delinquent was ... [Includes one data chart]

The Department of Housing and Urban Development has spelled out the conditions under which borrowers must successfully complete a trial payment plan before they can get a permanent standard loan modification under the FHA’s loss mitigation program. A HUD mortgagee letter (ML 2011-28) also specifies the time requirements for completing loan modification and partial claim documents for a servicer to receive an incentive fee. The FHA reported 13,368 loan modifications and 3,082 partial claims paid in June. A total of 119,703 FHA loan modifications were reported from October 2010 through June 2011, and 21,035 foreclosure claims were paid over the same period. Their workout ratios were ...