2004 report on predatory lending & servicing practices & their effect on corporate compliance,...

8/9/2019 2004 Report on Predatory Lending & Servicing Practices & Their Effect on Corporate Compliance, Conduct, Ethics &

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REPORT ON PREDATORY LENDING & SERVICING PRACTICES & THEIR EFFECT ON CORPOCOMPLIANCE, CONDUCT, ETHICS & ACCOUNTING

The following report is provided to directors, executives, compliance officers, accountants, law firmothers who are responsible for the proper governance of the public companies reflected in this report.

The companies that are receiving this report for investigation include BankOne, JPMorganWashington Mutual, Merrill Lynch, Ocwen, Fairbanks Capital, Citigroup, Litton Loan Servicing, Fanni

Freddie Mac and Option One.

Below, you will find a set of facts, supporting evidence and documentation that will clearly demonstraeach of the above named firms and/or subsidiaries of these firms are involved in direct or complicit sof predatory lending and servicing practices that are in direct violation of each companys stated cconduct and ethics. Many of the violations and practices put each company at systemic, operationareputational, and financial risk.

The balance sheet and accounts of each corporation are affected as well. A simple formula to undersif a mortgage of loan payment is improperly credited or an improper charge is applied or interemiscalculated, the loan must be individually recalculated, adjusted and amortized from each point

called error or wrongful or fraudulent charge. If not, then all resulting balances and reports are misland deceptive.

Also, the treatment of certain mortgage backed securities as true sales that may not be true sacreative financing of receivables with moral, implicit or secret recourse agreements could mean thaassets and their liabilities be reported on a companys balance sheet.

This report is subject to change and anyone having information that contradicts or challenges the fiallegations, facts and contents of this report or any other report listed in a subsequent web link can cthe author and provide their rebuttal, facts or information they wish to be taken into account. Our gobe as accurate and thorough as possible and to provide a fair description of facts as known.

Each of you receiving this report has a moral, ethical, legal as well as fiduciary duty to properly inveand substantiate the claims and insure that violation of each companys code of conduct and ethics haoccurred. Furthermore, they have a duty to insure that deceptive, fraudulent and predatory practicpolicies described below and in the web indexed reports have not violated such ethics and conduct co

The policies and practices listed below also violate many local, state and federal ordinances, lawregulations and those responsible for such compliance must insure that proper adherence to these being carried out. In the end, each respective individual that receives this report must use his or h

judgement and independence and not rely on executives and legal opinions from inside or related csince many such firms have their own conflicts.

One such avenue available to each director or executive is to have each CEO; officer or indimplicated undergoes an independent polygraph exam whereby specific and carefully crafted quedesigned to

The author to this report is willing to undergo such an examination himself to validate and suppconclusions, findings, allegations and facts. He is willing to share the cost of such exams witcompany so willing to support its CEOs certification.


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Each company has the right to polygraph its employees for suspicion of theft or impropriety. The authis report believes that polygraph exams be made a central part of compliance and that executirequired to undergo such a reasonable and cost efficient exam on a regular basis to insure the safetycompanys books, records and reporting.

A simple polygraph exam would go a long way to insuring the soundness and proper reportincompanys filings with the SEC.

To that end, if anyone should have any questions or need additional input, please contact the key authis report, Mr. Nye Lavalle at [email protected] and he will provide you with his personalnumber and address.

We trust that you will take the allegations in this report and the accompanying e-mail seriously and sthat your full and complete efforts

Any rebuttals, explanations, denials, or incorrect facts that you uncover would be greatly welcomed the facts as they are known can be revealed to all.

We thank you for your time and diligence ion this matter.

Respectfully,

Nye Lavalle

BACKGROUND FACTS

1. Nye Lavalle is a consumer and investor advocate dedicated to fighting predatory lending, sesecuritization and accounting abuses by major Wall Street banks, mortgage companies and servicwell as accounting scandals by the Government Sponsored Enterprises such as Fannie Mae and F

Mac.

2. Mr. Lavalle, is a renowned market and social researcher who has worked closely with many jouand the Associated Press. He has been quoted on the front pages of virtually every major newspAmerica including the Wall St. Journal, New York Times, USAToday and many others. He haappeared on a variety of news programs including PBS Nightly business report, CNBCs Power LunHardball with Chris Matthews. This information and fact can be found by typing or clicking on the fosearch strings:

3. http://www.google.com/search?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&filter=0.

4. http://news.google.com/news?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&tab=wn&filter=0.

5. http://search.yahoo.com/search?_adv_prop=web&ei=UTF-8&prev_vm=p&vp=nye+lavalle&vp_vt=any&vst=0&vf=all&vm=p&fl=0&n=20&xargs=0&pstart=1&dups=

6. http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&
mailto:[email protected]://www.google.com/search?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&filter=0.http://www.google.com/search?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&filter=0.http://news.google.com/news?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&tab=wn&filter=0.http://news.google.com/news?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&tab=wn&filter=0.http://search.yahoo.com/search?_adv_prop=web&ei=UTF-8&prev_vm=p&vp=nye+lavalle&vp_vt=any&vst=0&vf=all&vm=p&fl=0&n=20&xargs=0&pstart=1&dups=1http://search.yahoo.com/search?_adv_prop=web&ei=UTF-8&prev_vm=p&vp=nye+lavalle&vp_vt=any&vst=0&vf=all&vm=p&fl=0&n=20&xargs=0&pstart=1&dups=1http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40mailto:[email protected]://www.google.com/search?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&filter=0.http://www.google.com/search?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&filter=0.http://news.google.com/news?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&tab=wn&filter=0.http://news.google.com/news?q=+%22nye+lavalle%22&num=100&hl=en&lr=&ie=UTF-8&as_qdr=all&tab=wn&filter=0.http://search.yahoo.com/search?_adv_prop=web&ei=UTF-8&prev_vm=p&vp=nye+lavalle&vp_vt=any&vst=0&vf=all&vm=p&fl=0&n=20&xargs=0&pstart=1&dups=1http://search.yahoo.com/search?_adv_prop=web&ei=UTF-8&prev_vm=p&vp=nye+lavalle&vp_vt=any&vst=0&vf=all&vm=p&fl=0&n=20&xargs=0&pstart=1&dups=1http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40


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m=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilterg=&dpcollation=1&qk=40

7. For additional info, the same key words can be used in Factiva, Dow Jones, Vutext, Datatimesmajor newspaper or publication or search engine with searches from 1986 to present date.

8. As a market and social researcher, Mr. Lavalle has experience in and an understanding ostatistics, analysis techniques and methods to interpret data and information.

9. His experience in analyzing and determining patterns as well as correlation allow him the adocument and articulate findings, forecasts and predictions.

10. Using his research and investigative experience, Mr. Lavalle has found wide-scale national aninternational patterns of practices and abuses in the mortgage industry. He has isolated over seveindividual financial engineering schemes that directly affect borrowers, shareholders, financial markethe current and future beneficiaries of pension, trust and mutual funds.

11. Since 1996, Mr. Lavalle has devoted virtually his full time to the investigation, analysis and exof mortgage fraud, abuse and what are now known as predatory lending, servicing and securit

schemes. He began his investigation in 1993.

12. In his investigation, Mr. Lavalle has conducted hundreds of interviews [many taped], and has reover 2 million pages of documents, court files, evidence and complaints from around the nation.

13. The schemes and frauds he has uncovered have now been well documented by hundrconsumer advocates, lawyers, consumer groups and even some industry professionals who want tochange to the frauds by some of their colleagues.

14. The frauds being perpetuated today are done so by many of the same individuals and entities inin the Savings and Loan crisis of the late 80s and early 90s where government statistics found a 60%

rate.

15. In order to combat these white-collar crimes, dozens of new laws and regulations by local, stafederal governments and regulators have been enacted across the nation to curb many of the aidentified by Mr. Lavalle. The industrys own trade association [MBAA] keeps tract of these laws aintroduction of laws at its predatory lending center at http://www.mortgagebankers.org/news/. Here yfind pdf files of many laws as well as industry comments and actions.

16. Mr. Lavalle has spent over 14,000 hours and over $350,000 of personal and family resinvestigating, documenting and exposing the abusive and fraudulent patterns and practices in the momortgage servicing and mortgage banking industries.

17. Since 1996, he has written to and warned law firms; accounting firms, government agenciconsumers about various financial engineering techniques that mortgage companies, banks and thehave been involved in.

18. Such issues include: the financing of receivables that were not true sales; the use of off shoreas special purpose enterprises to hide debt that should be on the balance sheet; creating implicit, moside recourse agreements; hiding debt that should be on the balance sheet off balance sheet; usinderivative trades to increase revenue; and fraudulently over-charging customers to increase reventhe assumptions used for valuing mortgage servicing rights.
http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.mortgagebankers.org/news/http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.dogpile.com/info.dogpl/search/redir.htm?advanced=1&top=1&qso=location&q_all=&q_phrase=nye+lavalle&q_any=&q_not=&qbool=&qafter=1&qafterm=01&qafterd=01&qaftery=1990&qbeforem=06&qbefored=01&qbeforey=2004&domaint=&familyfilter=0&lang=&dpcollation=1&qk=40http://www.mortgagebankers.org/news/


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19. Furthermore, prior to enacting the Sarbanes-Oxley Act, Mr. Lavalle had taken stock with Walfirms and financial institutions and brought his allegations to various CEOs, executives, lawyers,members and accounting firms.

20. Some of the firms Mr. Lavalle took stock in were Bear Stearns and Washington Mutual. Hbegan informing each firms CEO and chief legal counsel as well as the managing partners at DeloiTouche [each firms accounting firm] about the frauds and abuses discovered.

21. He reported these abuses directly in phone calls, e-mails and meetings with Ace GreenbergLehman, James Cayne and others at Bear Stearns and with Kerry Killinger and William LyWashington Mutual and with Jeffrey Dimon of BankOne.

22. Mr. Lavalle began his effort due his family being one of the biggest victims of predatory lendiservicing practices. His investigation began in the early 90s and continues till this day. A copycomplete history and documentation of the fraudulent predatory lending and servicing abuses thataken against Mr. Lavalles family by EMC Mortgage, Bear Stearns, Savings of America, Washington and BankOne can be found at http://www.emcsucks.org/insert.pdf a web site maintained by vicpredatory mortgage abuse.

23. Mr. Lavalle possesses the exhibits to this report which total over 1000 pages from the over 2pages of evidence he has regarding the frauds and abuses directed at his family and other borrowBear Stearns, EMC Mortgage, Savings of America, Washington Mutual and BankOne. These docare available for inspection at reasonable hours in Atlanta, GA or copies made and sent upon request

24. These documents include hundreds of identical complaints that are only a small sampling of tof thousands of complaints and disputes communicated to these companies about predatory lendiservicing practices.

25. To demonstrate the arrogance of these white-collar criminals, EMCs own policy manuals d

borrowers as Smucks!

26. Mr. Lavalle was one of the first individuals to fight, attack and expose predatory lending and sepractices via investigations, guides and information to consumer lawyers and groups. Another of hireports titled 20th Century loan sharks can be found at http://www.emcsucks.org/AAMA_Report.pdf.

27. Fraudulent predatory lending and servicing practices and their industry wide application cdocumented by pattern and practice by analyzing the following facts and evidence.

28. Please visit and review the following web sites and their forums as well as the complaints listedfollowing links:

29. http://www.msfraud.org/forum.htm http://www.msfraud.org/howtheystehttp://www.msfraud.org/artic2.html http://www.msfraud.org/.

30. http://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search%21&q5=Emc+Mortgage&submit=Search

31. http://www.ripoffreport.com/results.asp?q1=ALL&q5=Ocwen&submit2=Search%21&q4=&q6=&q3=&q2=&q7=&searchtype=0
http://www.emcsucks.org/insert.pdfhttp://www.emcsucks.org/AAMA_Report.pdfhttp://www.msfraud.org/forum.htmhttp://www.msfraud.org/howtheysteal.htmlhttp://www.msfraud.org/artic2.htmlhttp://www.msfraud.org/http://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q5=Ocwen&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Ocwen&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.emcsucks.org/insert.pdfhttp://www.emcsucks.org/AAMA_Report.pdfhttp://www.msfraud.org/forum.htmhttp://www.msfraud.org/howtheysteal.htmlhttp://www.msfraud.org/artic2.htmlhttp://www.msfraud.org/http://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q4=&q6=&q3=&q2=&q7=&searchtype=0&submit2=Search!&q5=Emc+Mortgage&submit=Searchhttp://www.ripoffreport.com/results.asp?q1=ALL&q5=Ocwen&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Ocwen&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0


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32. http://www.ripoffreport.com/results.asp?q1=ALL&q5=Litton&submit2=Search%21&q4=&q6=&q3=&q2=&q7=&searchtype=0

33. http://www.ripoffreport.com/results.asp?q1=ALL&q5=Fairbanks&submit2=Search%21&q4=&q6=&q3=&q2=&q7=&searchtype=0

34. http://www.ripoffreport.com/results.asp?q1=ALL&q5=washington+mutual&submit2=Search

%21&q4=&q6=&q3=&q2=&q7=&searchtype=0

35. http://www.homesidecomplaint.com/

36. http://www.emcsucks.org/

37. http://www.contifairbankssucks.org/

38. An examination of the reports that Mr. Lavalle produced and a comparative analysis of his fagainst the complaints and findings of various Federal and State investigations clearly show the coindustry wide practice of predatory lending and servicing abuses.

39. One only needs to examine the lawsuit filed by the U.S. Justice Department, HUD and thagainst Fairbanks Capital and the resulting $50 million settlement and stipulated order as well settlements with the FLA. AG office and class action lawsuits to see the correlation and relevance bthe allegations and facts.

40. A pdf copy of the complaint and stipulated orders reached by the U.S. Justice Department, HUthe FTC with Fairbanks Capital can be found at the following web adhttp://www.contifairbankssucks.org/TheFairbanksProposedSettlement.html.

41. Copies of the settlement reached with the Florida Atty. General can be fouhttp://www.contifairbankssucks.org/FLORIDAGETSTHERES.html.

42. Also, during this time, another predatory mortgage servicer regulated by the OTS, Ocwen Freached a settlement agreement for identical predatory servicing practices. Ocwens practices, whidentical to those identified by Mr. Lavalle in his Predatory Bear report and those found at Fairbanlisted in an article on page 4 of the following pdf dochttp://www.nationalmortgagenews.com/wow/wow.pdf.

43. Details about the supervisory agreement reached with the OTS and Ocwen can be fouhttp://biz.yahoo.com/pz/040420/56144.html.

44. The Ocwen and Fairbanks schemes correspond to many of the complaints and allegations mMr. Lavalle against EMC in the Predatory Bear Report. The U.S. Justice Department and OTS havethese schemes to be deceptive and fraudulent. Yet, Fannie Mae and Freddie Mac still use and palike EMC Mortgage and Fairbanks Capital to service many of their loan portfolios.

45. In addition to these settlements, one only has to look at the FTCs own web site and Fannieown booklet titled Expanding Responsible Lending which can be founhttp://www.fanniemae.com/initiatives/pdf/lending/expandresponsiblelending.pdf.
http://www.ripoffreport.com/results.asp?q1=ALL&q5=Litton&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Litton&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Fairbanks&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Fairbanks&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=washington+mutual&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=washington+mutual&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.homesidecomplaint.com/http://www.homesidecomplaint.com/http://www.emcsucks.org/http://www.emcsucks.org/http://www.contifairbankssucks.org/http://www.contifairbankssucks.org/http://www/http://www.contifairbankssucks.org/FLORIDAGETSTHERES.htmlhttp://biz.yahoo.com/pz/040420/56144.htmlhttp://www.fanniemae.com/initiatives/pdf/lending/expandresponsiblelending.pdfhttp://www.ripoffreport.com/results.asp?q1=ALL&q5=Litton&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Litton&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Fairbanks&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=Fairbanks&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=washington+mutual&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.ripoffreport.com/results.asp?q1=ALL&q5=washington+mutual&submit2=Search!&q4=&q6=&q3=&q2=&q7=&searchtype=0http://www.homesidecomplaint.com/http://www.emcsucks.org/http://www.contifairbankssucks.org/http://www/http://www.contifairbankssucks.org/FLORIDAGETSTHERES.htmlhttp://biz.yahoo.com/pz/040420/56144.htmlhttp://www.fanniemae.com/initiatives/pdf/lending/expandresponsiblelending.pdf


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46. A careful examination of page 19 of this booklet titled preventing foreclosures where Fannstates predatory lending is not limited to the front-end of a mortgage transaction; abuses can oservicing as well. For example, abusive servicers may charge excessive late fees or fail to post payma timely manner, if at all.

47. These are the overall practices, but they take on various fraudulent financial engineering scdesigned to boost revenue, fee income and coerce larger payments than are owed that increaseincome for the firms.

48. The net effect of all of this to investors and securities regulators is that when payments aproperly credited, misapplied or unwarranted fees are diverted from the principal balances, thamortization of the loan is excessively and wrongfully increased.

49. Evidence provided to Mr. Lavalle by cash managers for Savings of America and Bank of Asupports that these so-called mistakes are in reality policies and procedures developed by CFOCCMs [certified cash managers] to financially engineer revenue streams, income, fees and to enbalance sheet results and meet earnings projections to Wall Street analysts.

50. There have been many settlements and acknowledgements of the charging of improper fees b

servicers. Yet, these servicers have not gone back and recalculated and readjusted each custaccount to each and every point of misapplication, improper charge, delayed credit etc.

51. As such, the principal balances are effected widely and we have seen loans that were off fromthousand dollars to over $40,000.

52. The industry has known of these frauds for years. This is one reason why the servicing to losold or transferred often or about once every 3 years. This is done so the new servicer doesnt have responsibility for the previous servicers so-called mistakes. In reality, these transfers are done toliability and to enhance the values of MSRs [mortgage servicing rights] when traded.

53. MSRs use various assumptions that include the outstanding principal balances. The effectproperly amortizing a loan is multifaceted. The outstanding principal balance is one of if not thimportant figure in a loan. Its the amount due on payoff. Its the amount used to determine purchMSRs and the mortgages themselves. Its the amount that is validated as the debt in disputes andthe law. Its the amount that is used when foreclosure is initiated as well as the amounts that determvalue of mortgage backed securities and the payoff and prepayment rates.

54. Misapplications and improper credits and charges also affect the prepayment rates that each agency and firm uses to calculate various risks and prices for mortgage backed securities. Furtheloans in a mortgage pool have their principal balances reported on an individual basis to investormonth. This creates violations of various Federal and state securities laws since false and mis

financial data that investors are relying upon is being communicated to the investors.

55. Furthermore, it poses additional liability to the mortgage pools since each and every loan that mto foreclosure could raise affirmative defenses to the amount of the payoff and a wrongful foreclosureor bring in the investors.

56. To understand the magnitude of this problem, you can look at the web site at http://wwwtrac.com. Macc-Tracc is an auditing firm and there are many others. Due diligence performed by theother outside firms has slowed since servicers dont want to have their due diligence performed by parties who may find massive fraud or so-called errors.
http://www.macc-trac.com/http://www.macc-trac.com/http://www.macc-trac.com/http://www.macc-trac.com/


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57. As such, many servicers conduct their own due diligence and then hold the seller to representations and warranties. The problem with this is that this hampers the true sale naturetransaction since the transactions could be viewed as recourse ones that then take over the propertifinancing of receivables or credit line.

58. To understand the effe3ct on such pools and on investors, please read the following articles onTraccs web site: http://www.macc-trac.com/WhyAudit.aspx. http://www.macc-trac.com/Issues.aspx.

59. Additional information on fraud in the industry can be found at the industry-supported databfraud and abuses. This industry only database can be found at http://www.mari-inc.com/.

60. Some in the industry have claimed that every mortgage loan in America contains some elemfraud.

61. Due to his actions as an industry whistleblower, Mr. Lavalle and his family have been unfairly tafor attack by various Wall Street Firms and banks to coerce his silence and to secure legal releasehim and his family against virtually every major bank, law firm and accounting from involved in the mobanking industry.

62. Copies of the releases demanded from Mr. Lavalle and the Pews will be provided upon request

63. Via conferences, attorney summits and vendor outings, members of the mortgage bankiservicing industries get together and conspire on how to keep information away from borrowetheir lawyers as well as how to support one another and destroy valuable evidence.

64. The industry has created and put various industry players in business and adhercommon set of underwriting guidelines, foreclosure practices, assignment and custody of moloans.

65. To document the abuses, Mr. Lavalle also created complaint web sites EMCMortgageComplaints.Com, WashgingtonMutualComplaints.com and others to solicit complainvictims across America.

66. Bear Stearns and EMC Mortgage then sued Mr. Lavalle for such things as intentional inflicemotional distress upon a corporation and trademark infringement.

67. BankOne, a partner of EMC and Bear Stearns and the trustee of a trust that Mr. Lavalle and Mwere the beneficiaries to, refused to provide Mr. Pew or Mr. Lavalle with distributions from the trdefend themselves.

68. Instead, BankOne and its lawyers and trust officers told the Pews and Mr. Lavalle to dbankruptcy, which the Pews did not want to do.

69. A former trust officer at BankOne, who was employed at the time at Northern Trust, also calLavalle and told him to put his family in bankruptcy. A lawyer for EMC said make it easy on your foput them in bankruptcy.

70. All in all, one of the tactics used when the industry is caught in their frauds is to havinsurance carriers and investors pay the legal fees. In many cases, despite their public position to the press and media, Fannie Mae, Freddie Mac and other investors as well as tr
http://www.macc-trac.com/WhyAudit.aspxhttp://www.macc-trac.com/Issues.aspxhttp://www.mari-inc.com/http://www.macc-trac.com/WhyAudit.aspxhttp://www.macc-trac.com/Issues.aspxhttp://www.mari-inc.com/


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such as State Street Bank, Bankers Trust and BankOne work behind the scenes to suppofrauds of the servicers.

71. In the majority of cases, notes when required to be produced in judicial foreclosure such as Florida are claimed to be lost, stolen or destroyed and the servicer claims to be thowner of the note and the only one with a beneficial interest in the note or mortgage.

72. In reality, as evidenced via the document located at the industrys MERs web site

foreclosure at http://www.mersinc.org/Foreclosures/index.aspx [click on state of Fla.] the seacts as an agent for the investor in foreclosure and in bankruptcy proceedings and conceainvestors ownership.

73. Furthermore, the chain of assignments to the mortgage are often missing or are handthe industry only electronic system call Mortgage Electronic Registration Systems locahttp://www.mersinc.org/. MERS, which was created by Fannie, Freddie and the MBAA as weowned by the industry.

74. MERS refuses to give the public access to their records telling them who only servicnote, but not who may have any beneficial interest in the note itself and other parties in intere

potential lawsuit.

75. In fact, Fannie Mae and MERs go to great lengths to hide and conceal the true holders course and the entity, trusts or owners of beneficial interests to the notes.

76. A review of the following Georgia Supreme Court ruling whereby Fannie Mae was the owner of the note that was not disclosed to the borrower will help explain the role of http://www2.state.ga.us/Courts/Supreme/pdf/s03a0137.pdf.

77. In addition to these frauds, Mr. Lavalle had detailed conversations with leading analyMoodys, Fitch and S&P who rate not only the credit ratings on the various issuance of mo

backed securities, but also rate the actual mortgage services in their performance of their dutie

78. While each ratings agency states that compliance is a factor in rating the performance omortgage servicer, each of the ratings agencies have full and comprehensive knowledge various frauds, schemes and predatory practices as well as the dozens of predatory lendinorigination frauds.

79. Their knowledge is well known and dozens of reports and presentations on the subjectbeen issued. Copies of these reports and presentations are available upon request.

80. The ratings agencies have failed in their reviews and ratings methodologies for servic

take into account the risks inherent in the frauds and the potential for assignee liability to invand trustees.

81. They have failed to take into account the billions of dollars in missing, lost and desmortgages and notes across the nation and the

82. The threat is that in a case of a major collapse or bankruptcy of a Wall Street firm likStearns ala LTCM derivative crisis, systemic risk among counter parties to these transactionsmake the market fall like a stack of cards.
http://www.mersinc.org/Foreclosures/index.aspxhttp://www.mersinc.org/http://www2.state.ga.us/Courts/Supreme/pdf/s03a0137.pdf.http://www.mersinc.org/Foreclosures/index.aspxhttp://www.mersinc.org/http://www2.state.ga.us/Courts/Supreme/pdf/s03a0137.pdf.


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83. Upon such a failure, the underlying collateral that is the mortgage and/or promissorbecomes key as to that will be entitled to future payments from the borrower.

84. The failure to properly record assignments and perfect lien positions, only to haunderlying instrument declared lost or stolen or appear with missing assignments poses a thvirtually every pension, mutual and trust fund that invests in these high risk securities.

85. In fact, one ratings analyst informed Mr. Lavalle that the entire industry is a scam and th

true sale opinion letters being written by major law and accounting firms werent worth thethey were written on since everyone knew that the majority of transactions were really financreceivables since there were many side recourse agreements that the ratings firm were awarearticle appearing in CFO Magazine confirms the analysts concerns. This article can be found

86. http://www.cfo.com/article/1,5309,9621||M|586,00.html?f=home_featured.

87. This article is headlined False Security? Corporate insolvencies are testing whether securitizatstable structure or a flimsy facade.

88. If a bankruptcy court, like in the LTV case, were to rule that in fact the securities or mortgages

property of the bankruptcy estate and had not been properly isolated in trust, then the whole industrycollapse and investors taking a back seat and position to other creditors.

89. In fact, at the Bond Market Association's annual meeting in New York in April of 2003, the moof a panel on asset-backed securitization (ABS) joked that this enormously popular form of strufinancing has "proven to be bankruptcy remote except perhaps in the event of bankruptcy."

90. For investors and honest CFOs, that's no joke. ABS and MBS products are popular because thsupposed to transfer illiquid corporate assets (such as receivables) to a bankruptcy-remote entSPV/SPE], which then allows them to be repackaged and sold as securities. Once the underlying asslegally separated from the company's fortunes and its creditors those securities typically carry

ratings than the company's own debt issues.

91. It also allows the company not to carry this debt on its books. However, many companies likehave stood behind these offering with wink or nod or side agreements guaranteeing performance aobligation. In such a case, if there are recourse provisions, then these true sales are not true salesbut sham financing of receivables that places investor money at risk.

92. The firms that follow have all been notified by Mr. Lavalle of such situations and are fully awareissues at hand: Bear Stearns, Washington Mutual, H.F. Ahmanson Company, Merrill Lynch, FanniFreddie Mac, BankOne, Deloitte & Touche, Stroock, Stroock & Levan, Fulbright & Jaworski, ClaCadwalader, Wickersham & Taft, Butzel Long,

93. Ironically, trusts and mutual funds that Mr. Lavalle and his family [the Pews] are beneficiaries tknowingly supported the very abuses and frauds perpetuated in the industry by purchasing such himortgage backed securities and investing in mutual funds that do.

94. Mr. Lavalle in his investigation found that the trustees of these trusts and their parent comBankOne and Merrill Lynch, have also been involved in many of the frauds and abuses discovered as the support and concealment of these frauds and abuses.
http://www.cfo.com/article/1,5309,9621%7C%7CM%7C586,00.html?f=home_featuredhttp://www.cfo.com/article/1,5309,9621%7C%7CM%7C586,00.html?f=home_featured


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95. Both Merrill Lynch and BankOne are also involved in business practices and transactions witMortgage are members of MERs and use many of predatory servicers.

96. What is even more incredulous, is that employees of firms like Merrill Lynch and Bear Sthat sell Fannie Mae and Freddie Mac bonds, tell clients that such bonds are backed guaranteed by the U.S. Government when in fact the implicit and moral recourse that does nohas been perpetuated by an elaborate and fraudulent scheme of misrepresentations by brokers

97. For Mr. Lavalle and the Pews, what was even more ironic, BankOne and Merrill Lynch thatrustees to trust funds that Nye Lavalle and his family are beneficiaries under, refused to pbenefits to the Nye Lavalle and his family that they were entitled to protect themselves and buclients, partners and associates who were spending over $1 million attacking Nye Lavalle afamily over a $100,000 original mortgage.

98. Both BankOne and Merrill Lynch have significant business relationships with EMC Mortgage, wa unit of Bear Stearns.

99. Furthermore, two of the law firms retained by Nye Lavalle and his family, after supposedly rconflicts checks the Nye Lavalle had requested, were actually representing not only Bear Stearn

company attacking Mr. Lavalle and the Pews, but also BankOne and Merrill Lynch.

100. In the case of Butzel Long, they conceal that Bear Stearns was a client of theirs as well as Mae and Freddie Mac. Even more astounding was the fact that a partner at Butzel Long sat on the bdirectors of Fannie Mae and Butzel Long hid this fact.

101. In his work, Mr. Lavalle has written guides and reports that document and chronicfraudulent financial engineering abuses and frauds taking place in the mortgage banking indus

102. The abuses and financial schemes that Nye Lavalle has identified has become the subvarious State and Federal investigations and regulatory actions.

103. They have also become the subjects of wide spread press and media attentioinvestigations. Many of these media investigations can be found at the links provided http://www.msfraud.org/media5.html.

104. These investigations have led to fines in the millions of dollars being leveled by stafederal regulators for mortgage servicing and banking abuses.

105. In as much as executives and legal counsel would like to paint Mr. Lavalle as a constheorist, paranoid or a kook, one only has to wonder the logic of not accepting paymeninstituting over $1 million dollars in litigation over $100,000 note and then a web site.

106. The Pews had plenty of money to pay off the note and offered to do so as well as had a $2trust fund.

107. Mr. Lavalle offered to give up the web address names back to Bear Stearns for a donation of wpaid for them to Ace Greenbergs favorite charity.

108. The bottom-line, as admitted by Bears own lawyers in an e-mail that was never shown to Mr. until discovery in a lawsuit was that Bear and EMC wanted Nye Lavalle to shut up and to stop trexpose them for they were fearful of what he had found.
http://www.msfraud.org/media5.html.http://www.msfraud.org/media5.html.


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109. Rightfully so, executives of Fairbanks were fined and sued by the U.S. Justice Department and executives at Freddie Mac are under criminal investigation.

110. A common PR and business practice by major corporations is to attack and retaliate againdustry or company whistleblower. This is why legislation had to be enacted to protect employecame forward with stories of fraud and abuse.

111. Inflicting financial and emotional harm on whistle blowers to make them an example is operandi for many corporate lawyers, executives and PR personnel.

112. Make them look greedy, nuts, insane and disgruntled is Attacking a Whistleblower 101

113. Make him an example so others wont follow his or her course is chapter 2.

114. Mr. Lavalle and the Pews turned down a $500,000 settlement offer for their silence.

115. The Pews and Mr. Lavalles demands at that time were as follows: Payment to the Pews an aequal to what EMC paid its lawyers [less than $500,000 at the time] and for EMC to change its pra

and policies so that this would never occur to any family again.

116. What the Pews and Mr. Lavalle didnt know at the time was that the abuses were happeningonly thousands of EMC customers, but to tens and even hundreds of thousands of mortgage cusaround the nation at companies like EMC, Ocwen, Fairbanks, Litton. Wendover, Olympus and others.

117. Strange enough, there was one major element to all of this. The state of Texas seemed to epicenter for these companies as it was for the Savings & Loan crisis.

118. The Pews demand was motivated by a desire that no other family in America would ever go tthe indignity, hurt, pain, humiliation, despair and financial ruin that was being directed at them.

119. Bear Stearns lawyers and executives tried to portray the Pews as McDonalds Style Pclaiming they were seeking 18 million in damages. This was untrue.

120. The Pews demand for settlement at the beginning was show us the accounting records swe could audit our loan, determine what we owe you and pay you off in cash within 14 days aprovide us the note back stamped paid in full.

121. EMC refused to do so. The question of why must be asked here.

122. Mr. Lavalles research shows that such prepayments are detrimental to the pricing and credit

of the mortgage backed securities being marketed. Prepayments hurt the pool and the assumptions value various financial numbers such as the MSRs.

123. Another fact, is that the servicers cant really settle any lawsuits in that they are controothers who are the investors and trustees who are paying their legal bills and any settleincurred. As such, the servicer such as EMC does not own the notes.

124. Basically, the special servicer is a glorified collector and henchman designed to intimidper their manuals use fear as a motivating factor to pay] and extort money not owed.


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125. Often referred to in the industry as the toxic waste dump. Special servicers are asservicing rights to loans that are scratch and dent. Not able to be underwritten by FanFreddie; have elements of fraud that have been identified or have become PITA borrowers [Pthe A**es].

126. Yet, as in EMCs case, they never in one court hearing or in any subsequent proceedindelivered the original promissory note and deed of trust into the court record or for productrequested.

127. In fact, new evidence suggests that EMC never owed the not or any beneficial interestthan to service the note. This is evidenced by reviewing the FLA. Appeals Court ruling that yofind at: http://www.4dca.org/July2003/07-23-03/4D02-4051.pdf.

128. This case is important for many reasons. First, Florida is a judicial foreclosure state wthe original promissory note and deed must be entered into the court records when foreclosinitiated.

129. Mr. Lavalle has reviewed thousands of court files only to find that in 95% of the casenotes are claimed to be lost, stolen or destroyed in affidavits. Fannie Maes counsel said

nearly impossible.

130. Yet, evidence uncovered by Mr. Lavalle shows that billions of dollars of notes are somissing.

131. Another fact is that the note that is referenced above in the Hartly Lord case is froidentical sales transacton from Savings of America to EMC to State Street and various trusEMC has kept hidden. EMC could not prove

132. Evidence also shows that in certain bankruptcies and foreclosures, more than one parclaimed an interest as a creditor.

133. The industry uses the servicer as the henchman, yet they are not the owners or holders course of the note. They are only agents, yet they are testifying and stating in state and Fcourts that they are the creditors and no other parties have an interest.

134. As can be seen by the Lord case, these are out and out bold face lies and frauds and pupon the courts.

135. In the Lord case, EMC and State Street could not prove or show possession or payment note. A note valued in the hundreds of thousands was discharged.

136. Now, the law firm of Echevarria & Associates in Tampa, Florida, which is known to engfraudulent practices, is lobbying to get the law changed in Florida.

137. Another motive and intent for EMC, Ocwen, Fairbanks and others, is to foreclose on that have large amounts of equity in them so that as one EMC employee was quoted as sayincan buy low and sell high.

138. EMC, Ocwen, Fairbanks, Litton and other special servicers as part of their compensation get tthe net liquidation proceeds. This means that any net difference between the price paid to the invethe foreclosure and then the price that the property is sold for at a profit gets to go to the servicer.
http://www.4dca.org/July2003/07-23-03/4D02-4051.pdf.http://www.4dca.org/July2003/07-23-03/4D02-4051.pdf.


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139. As such, there is much incentive for these servicers to extort money form borrowers using aggcollection techniques.

140. Anthony and Matilde Pew purchased a home in Dallas, Texas and took out a mortgage with Sof America. A complete history of the findings pertaining to their loan can be found in the Predatoreport listed above.

141. From the inception of the loan, Savings of America loan officers, executives, management acompany itself defrauded the Pews as well as countless numbers of other borrowers through ovdozen fraudulent and predatory lending and servicing practices.

142. These practices, that were later discovered, identified and documented by Nye Lavalle in his reefforts, target hundreds of thousands of elderly, minority and disadvantaged Americans to strip thefrom their homes and extort payments far exceeding what is right and customary to financially booengineer their earnings and smooth public earnings reports to the SEC.

143. Such false reporting and subsequent discovery by the Nye Lavalle of wide spread fraudmortgage securitization industry places the financial system in America at risk in addition t

taxpayers, pension, mutual and trust funds that purchase such mortgage backed securities anbeen the recent subject of criticism by US. Senators, The Federal Reserves Alan GreenspaWarren Buffet in public disclosures and testimony.

144. Most recently, Freddie Mac and Fannie Mae have admitted major accounting misstatempublic SEC filings in the billions of dollars and are being investigated for civil and cviolations. Regulatory, class action and private lawsuits have also been filed againstmortgages companies by HUD, the FTC, DOJ and private consumers. A major component Lavalles discovery were the schemes on how Fannie Mae, Freddie Mac and major banks anStreet firms were conspiring together via the use of various "cash management," "casmanagement," "balance sheet management," and other "financial engineering" schemes were

reality only fancy words for cooking the books.

145. Nye Lavalles knowledge came to him via inside sources at major banks, mortgage comand ratings agencies who did not like what their companies were doing and/or did not like whoccurred to Nye Lavalle and his family.

146. This knowledge of major law and accounting firms engaging in these practices havesubsequently confirmed in the Enron bankruptcy case and the ratings firms were chastisCongress for their knowledge and complicity as well as the bankruptcy trustees report in the case that did not only implicate Arthur Anderson, but Enrons law firm Vison & Elkins, KirklEllis and others.

147. The selling of assets from a companys left hand to their right hand comes with the cinput of outside counsel and accountants. Yet, these very firms have full and complete knowof side agreements, recourse provisions and pledges as well as case law that goes against thgrain of such opinions.

148. In essence, the Mr. Lavalles knowledge came years before the knowledge obtained in Eand mirrored directly his allegations of corporate corruption and accounting abuses in the usebalance sheet accounting, special purposes enterprises and vehicles and in particular the wri


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true sale legal and accounting opinions that major law and accounting firms knew were not the letterhead they were written on,

149. In fact, Mr. Lavalle had also stated since the late nineties that he believed that Freddie MFannie Mae were complicit in much of the mortgage abuse in the nation and that he had evidence ocooking their books.

150. The true sale opinion letters, such as those used by Enron, allow companies, to hide and plac

off the balance sheet in various mortgage and asset backed securitization transactions using off-shoreand special purpose enterprises, that in reality are a sham financing of receivables that shouldbalance sheet since side, implicit and not publicly disclosed recourse agreements exist between the p

151. Such abuses are now the focus of investigation by the U.S. Congress, state legislatures, thU.S. justice department and dozens of state and local jurisdictions across the nation. Even Alan Greand the Federal Reserve in recent testimony before Congress are now warning of the "systemic risk"by the GSEs that Mr. Lavalle first warned of over four years ago. Prominent regulators, economiinvestors, such as Warren Buffet, are publicly warning and debating the use of these various finderivative products as posing a major threat to the U.S. economy. Mr. Buffet has called them thweapons of mass destruction.

As a productive first step, wed request that each board member, executive and legal counsel that thisis addressed to examine and adopt the following Mortgage Servicing Best Practices and recommenda

First and foremost, a National Compliance Center that is a non-profit organization should be establishfunded by a variety of sources and entities that include: Fannie Mae, Freddie Mac and their foundatioMBAA; major servicers and banks; investment community and ratings agencies; consumer gadvocates and law firms and private foundations.

This non-partisan organization should be governed by a board of directors composed equally by adv

and industry representatives.

The center should oversee compliance on all levels of the mortgage banking industry from financial reto mortgage servicing and predatory lending issues. It should be a functional part of the industry. Tcostly litigation for borrowers and lenders alike, a dispute resolution board and a non-binding arbsolution should be offered [not mandated] to any borrower not happy with the ultimate offer of resolutio

The first step would be for both the borrower and lender to submit their positions and stances abodispute as well as what they would propose for resolution. After a review of the facts and additionfinding if necessary, a non-binding settlement proposal would be submitted to the borrower and servacceptance. At worst case, it would be a starting point for resolution.

Fees to borrowers and lenders would be developed based on the complexity of the matter; the valueproperty; the amount of the outstanding principal balance and the financial resources of each party.

The NCC would maintain procedures and training for servicers, lawyers and advocates alike.

It would also conduct research for servicers and investors to update best practices procedures.

It is estimated that an initial budget of $5 million would be required to fund the center.


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The following are proposed best practices for your firm to consider and enact:

MORTGAGE SERVICING BEST PRACTICES

Mortgage servicing problems not only affect borrowers, but also affect the mortgage banking andinvestment communities. A lack of proper disclosure and deception can fuel the potential for fraudabuse and potential liability for investors and government.

Predatory lending and servicing practices can impact and impair the reputation of lenders, servicersand investors which could lead to systemic risk and injury to mortgage banking secondary markets.

As such, we believe that it is in the interests of consumers, investors, shareholders, bondholders andgovernment to insure that mortgage transactions and servicing are fair, reasonable and transparent toeveryone.

Such transparency will quickly identify anyone abusing the system, consumers, lenders and investorsso that such abuses can be immediately rectified to protect the company, borrowers and the market.

As such, [name of lender/bank] agrees to adhere to the following Mortgage Servicing Practices andshall direct our servicing operations or any other entity servicing a mortgage on our behalf or in ourcapacity as a fiduciary to any trust that is being serviced that all master Servicers, Servicers, Sub-servicers and Special Servicers adhere to and comply with the following practices:

SERVICING TRANSFER, ACQUISITION & ASSIGNMENTS

1. Servicers shall employ adequate quality control and due diligence procedures in accordance withthe latest guidelines to be issued by the National Compliance Center.

2. Proper due diligence and data integrity shall be performed to assure that data receivedfrom a prior servicer is accurate and complete including nth number random selection ofaccounts for loan level information verification against actual loan documents.

3. Copies of due diligence reports shall be supplied to the National Compliance Center and storedfor a minimum of 4 years so those systematic patterns of abuse may be identified.

4. Any fraud, error, misapplication or problem found on any loan in due diligence shall beimmediately corrected and the loan shall be properly adjusted, recalculated and amortized.

5. Any error, misapplication or fraud found shall be reported to the National Compliance Center andto the borrower as well to the industry database at MARI.

6. Data checkpoints shall include critical data fields relating to the accurate servicing of the loansData fields to be verified include items such as first payment date, maturity date, term, late charge,assessment controls, lien position, property address information, etc.

7. Hello letters will be sent to the borrower alerting them of the transfer of servicing and providingtoll free telephone numbers for contacting Customer Service.


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8. Additionally, the letter will advise the borrower where to send future payments so the servicingtransfer does not impact the status of their account. RESPA requires the letters to be sent within15 days of the loans being boarded to the new servicers system. Servicers will send welcomeletters within 24 hours after transfer.

9. Transfers of servicing shall occur according to current RESPA guidelines. However, in addition tothe transfer of servicing, the following information shall be provided to the borrower with this noticeor soon thereof within 30 days of any assignment.

10.If the servicer owns the note and mortgage and is keeping it in their portfolio, then theborrower shall be notified of this fact in the Transfer of Servicing letter.

11.If the servicer is acting as a master servicer, servicer, special servicer or sub-servicer onbehalf of any pool of securitized mortgages, the servicer shall notify the borrower of theactual trust name as well as the name of the trustee for the trust and their contactinformation.

12.The borrower shall be notified of any subsequent assignments of any beneficial rights tothe borrowers mortgage obligation, whether publicly recorded or not, or tracked in any

internal computerized or electronic system including, but not limited to, MortgageElectronic Registration Systems.

13.The Hello letters will provide information regarding amount due (including a specific breakdownof any amounts other than principal and interest) and allow the borrowers to dispute theinformation provided to the Servicer.

14.All assignments of mortgages and notes that are endorsed shall first be endorsed on thefront of the note until there is no visible room left and then on the back of such note untilthere is no place for an endorsement stamp to be placed

15.All endorsements shall be signed and dated on the date of endorsement.

16.If an endorsement is left blank, as is the policy of Fannie Mae, Freddie Mac and others, anexplanation for why such endorsement is left blank shall be provided to the borrower.

17.Only when there is no room left on the front and back of a mortgage, shall an allonge beallowed to be used and attached to the physical note or mortgage itself.

18.Borrowers shall have the right to request and be provided the names and contact numberof all servicers, sub-servicers, special servicers, trusts, trustees, investors and documentcustodians that service or hold their mortgage in any manner.

DISPUTE RESOLUTION

1. When a dispute arises between a borrower and Servicer and a validation of debt is requestedthe servicer shall audit the loan to insure that all payments have been properly applied, interestcalculated, principal reduced, escrow calculated and fees assessed or charged.

2. When a breakout is requested by a borrower of charges or fees assessed to a loan orcollected form a loan, the servicer shall provide the borrower with the following:

1. The amount of the charge;


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2. The reason and policy for the charge;3. The particular clause in their note, mortgage or deed of trust that authorizes suchcharge, if requested;4. The name and address and/or invoice and cancelled check if requested for thecharge placed upon the borrowers account.

3. Historical audits shall be performed on daily simple interest (DSI) loans setting the standardfor quality assurance of payment postings. Mortgage loans have been typically amortized

using a standard calculation of monthly interest regardless of the date the payment wasreceived. When required by the note, DSI amortization methodology shall be used. Thismethodology calculates and accumulates interest on a daily basis.

DISPUTE RESOLUTION

Prior to foreclosure proceedings being initiated, the servicer shall take the following actions:

1. Review and make certain that all disputes have been resolved to the borrowers satisfaction andthat there are no disputes regarding the following specific servicing areas:

1. Payment(s) Missing/Misapplied2. Unexplained Increase In Payment of P&I3. Unexplained Increase In Escrow Payment4. Wrong Payoff Amount5. Failure To Produce Payoff Statement6. Misc. Charges Applied To Account7. Failure to Answer RESPA QWR Letter Issues8. Failure To Report Or Fix Credit Bureau Issues9. Force Placed Insurance Issues10.Tax Escrow Issues11.Forbearance Plan Issues

12.Bankruptcy Plan Issues13.Disputes With Prior Servicers14.Unapplied/Suspense Balance Issues15.Prior Servicer Disputes16.Promise to Pay Issues

2. Servicer will not attempt or charge, assess or collect late charges or fees after mortgage has beenaccelerated;

3. Servicer will not attempt or charge, assess or collect from the borrower legal fees and expensesrelated to a borrower suing the servicer or prior servicer for servicing disputes or to protect their

legal interests;

4. Servicer will not reject any payments from borrower if after review and audit of the account, theamount tendered brings the account within 90 days of being past due;

5. Prior to foreclosure, the servicer will let the borrower know what the last appraisal and BPOamounts were on the borrowers property and if the borrower has more than 20% equity on a loanof over $100,000 or over $30,000 equity on a larger loan, the servicer shall inform the borrowerthat amount of equity the borrower stands to lose


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6. Employees, executives, law firms and REO vendors of the servicer and their families and friendsshall not be allowed to bid or purchase homes being foreclosed on by the servicer.

CUSTOMER SERVICE

1. Call center hours will be Monday through Friday from 7am to 8pm (eastern) to accommodateborrower calls across the country.

2. Additionally, the call center will be open from 8am to 5pm (eastern) on Saturday; however, onthe second Saturday of every month, Servicer may close at 12pm (eastern).

3. Call recording software will be employed to capture phone calls for quality control monitoring.

4. Any employee found to yell, scream, swear or unreasonable threaten a borrower shall bedismissed.

5. Collectors shall be compensated with bonuses, however no bonus shall be paid or incentiveprovided for the amount of money brought in by the collector.

6. Bonuses for positive customer service compliments and letters shall be encouraged.

7. Tapes of all calls between borrowers and servicing personnel shall be stored, indexedcataloged and for four years;

8. The borrower may request to have the call taped or taped the call himself and the servicershall not disconnect any borrower who has informed them that the call is being tape-recorded;

9. Call abandonment rates shall be closely monitored and reports of such rates provided to theNational Compliance Center for review and analysis.

10. Borrowers calling in shall be informed of the approximate waiting time to speak to the nextrepresentative if more than one minute. During any wait time, consumer information aboutheir loan and rights and these servicing guidelines shall be played as to inform the borroweras to his or her rights;

11. Calls will be reviewed and scored and the Customer Service Representatives (CSR) will betrained based on the call results. Each CSR shall have at least three calls per week monitoredand scored with an increase to a minimum of seven within 3 months;

12. Bilingual CSRs shall be certified in Business Spanish.

13. The voice response (IVR) function shall have a selection for a Spanish-speakingrepresentative.

14. A Borrower Satisfaction Survey developed by the National Compliance Center and the PewResearch Foundation shall be administered to a random sample of borrowers in each pool ofmortgages and such sample shall be selected on an nth borrower basis in numbersdetermined by the National Compliance Center and Pew Research Foundation. The sampleand survey shall be administered at direct cost by the National Compliance Center and thePew Research Foundation.


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15. Servicers shall foster a one call resolution as the primary tenet of Customer Service.

16. Trained Dispute Response Units shall be utilized to resolve disputes while the borrower is onthe phone;

17. If further research or an audit is necessary, then the investigation and response shall occuwithin a reasonable time frame, typically around 20 days. If further time and research isnecessary,

18. A payment booklet will be prepared and sent to any borrower, upon request and payment of anominal fee, when the monthly P&I and escrow payment is at a fixed rate.

19. Qualified written requests will be addressed and each question responded to within therequired legal time frames without charge to the borrower;

20. The National Compliance Center and AAMA have developed the attached detailed QWR lettethat each servicer should be able to respond to with the information contained in their systems.

21. Standardized responses for various types of loans may be developed as templates to assis

servicing representatives to answer the questions, however difficult they may be, of borrowers.

22. In lieu of the actual response, a booklet in easy to understand language may be supplied to theborrower along with copies of all servicing records that answer the borrowers questions and akey code to guide the borrower on how to determine the information requested from theenclosed documents;

23. The Servicer will seek to achieve most resolutions within 30 days of receipt of the writtenborrower letter, with a goal of reducing that number to 20 days or less at the earliest possibledate. A return telephone call is also made to ensure the borrower understands the resolution ifthe issue is not resolved in the borrowers favor.

24. A Quality Control Team will be responsible for reviewing telephone calls and writtencorrespondence to assure quality in the communication with the borrower.

25. Workforce management software shall be implemented and remain in effect to assist inforecasting customer service staffing needs and to assure timely call accommodation andreduce overall and unnecessary hold times. This is used in conjunction with real timeadherence which allows real time monitoring of call volume and CSR availability.

26. All customer service policies and procedures will be available and updated online on theServicers Intranet. This will provide all The Servicers staff with easy access to Servicers

policies and procedures enabling better and quicker service.

27. Customers will be provided with Monthly Mortgage Statements that have been redesigned tomake the Statement easier to read and understand. Each statement will be provided with aHow to Read Your Monthly Statement brochure. This brochure provides step-by-stepinstructions for reading the Statement and provides frequently asked questions and answersmost borrowers have regarding their Statement.

28. Inbound calls from borrowers that are less than 30 days delinquent will be routed to customerservice instead of collections.


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29. Servicers shall implement a quality audit process that reviews planned credit bureau reportingprior to submission to the credit reporting agencies.

COLLECTIONS

1. Servicers shall maintain extended office hours to accommodate borrowers needs as discussedherein. Borrowers shall be encouraged to telephone the Servicer at any time during call center

hours to discuss loan issues and resolve delinquencies and problems.

2. No calls will be placed to the borrower before 8am or after 9pm (borrower local time).

3. No calls will be placed to the borrower at the borrowers place of employment unless the borroweauthorizes such in a taped phone call or by writing or e-mail

4. Collectors may follow scripts provided to begin the call, identify the borrower, state the Servicersname and advise the purpose of the call.

5. Collectors shall identify the borrower using first and last name and refer to the borrower as Mr./Ms

for the remainder of the call.

6. Collectors will identify themselves using their full name or Mr./Ms. and their last name.

7. Collectors will focus not only on the payments due, but also on the borrowers reason for default.

8. Any servicing problem or dispute provided by the borrower shall be noted in the servicing systemand coded accordingly and sent to quality control for review.

9. Borrowers shall be informed to place their dispute in writing and provided a web address wheresample QWR letters are located for various disputes.

10.Collectors will utilize active listening skills to determine why the borrower fell past due and will betrained to ask follow-up questions, and clarify the details of the borrowers situation.

11.If a borrower falls into specific hardship areas. The collector will refer borrowers to DelinquencyResolution Program (DRP) resolutions where such programs will address a borrowerscircumstances.

12.Collectors will offer real solutions that may help the borrower locate additional income orresources and educate the borrower on the benefits of making payment (e.g., restore creditbureau reporting rating, avoid additional fees).

13.Collectors will also make appropriate referrals to non-profit Consumer Credit Counseling Servicesand Housing Counseling Organizations to assist in addressing debt and credit issues.

14.Under no circumstance are collectors allowed to use threatening, abusive, profanecondescending, or antagonist language toward the borrower.

15.If a borrower is unable to afford paying the total amount due, collectors shall attempt to schedule aseries of payments over succeeding months equal to the amount past due or will otherwise referthe borrower for a DRP resolution.


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16.If a borrower is unable to afford a payment arrangement for the total amount due before monthend, the collector shall calculate and offer a repayment plan that spreads the payment over 90days. This option allows the borrower to make a series of payments that will bring the account up-to-date. The goal of the repayment plan is to help the borrower avoid fees and ultimately avoidforeclosure.

17.If such a plan is unaffordable or otherwise unworkable given the borrowers circumstances, the

collector will refer the borrower for a DRP resolution.

18.The Servicer will record collector calls to borrowers and randomly monitor those calls for qualitycontrol

19.The Servicer shall have a strict compliance program and disciplinary measures, includingtermination, for collectors who fail to meet the highest standards in customer service.

20.Collectors shall have the ability to waive late fees if the borrower is experiencing a hardship suchas natural disaster, disability, involuntary income impairment, divorce, etc.

21.Supervisors, Managers and Directors can waive fees including, late fees, NSF, EZ Pay/SpeedPayand interest on advances.

22.Collectors will set hold dates to avoid calling borrowers who have a legitimate issues and disputesthat are in the process of being resolved.

23.Collectors shall connect the borrower to other departments to address particular issues and suchresponse times shall be within three minutes. If longer, the collector shall get the borrrowersnumber and have the specific department contact the borrower at a convenient time.

24.Collectors may suspend early collection activity for borrowers that have a consistent pay history

and who have raised a dispute.

25.Initial collection letters will be sent no sooner than the 17 th day of delinquency when late chargesare assessed. (Other collection letters may be required to be sent pursuant to contractuarequirements based on whether a loan is in a certain mortgage pool.) However, there shall be nofee for such letter at any time.

26.Upon the transfer of a loan from a prior servicer, Servicers shall not assess any fees or initiate theforeclosure process or assess late charges for a period of 60 days after loan boarding since it maytake a few months for the payments to come to the new Servicer.

This should help reduce unnecessary late charges and other fees from being assessed.

LATE FEES

1. Any late fee or charge that is tied to a percentage of the mortgage payment that is late, shalbe deemed to be a liquidated damage claim for expenses related to such payment being late.

2. As such, servicers shall be prohibited from assessing or charging any fee, other than the latefee for such actions and services that are requested by the investor or other servicers such as


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BPO fees, appraisal fees, inspection fees, demand letter fees, collection fees, and any feerelated to delinquency or collection status.

3. Late fees shall be assessed and carry over until payment in a separate bucket and shall neverbe deducted from a borrowers account

4. Servicers may not report a borrower as delinquent for the non-payment of late fees or otheassessed charges if they are current in the payment of their regular monthly principal and

interest payments.

5. Servicers may not subtract late fees or charges from a borrowers payment until all current andpast due principal and interest payments have been applied first.

6. Servicers may not pyramid late fees or charges.

7. Late fees will be assessed to a borrowers account initially on the 17 th day of delinquency.

8. Servicers may not foreclose on a borrower for unpaid late fees, if all principal and interespayments are current.

9. Late fees charged will conform to the note and follow state restrictions.

BPO, APPRAISAL & INSPECTION FEES

1. BPO and appraisal fees are not the responsibility of the borrower. These fees requested by theinvestor and servicer to determine the market value of the property for valuation of serving rightsmortgage pools and investor reporting shall not be assessed or charged to the borrower underany circumstance.

2. Property inspections shall not occur on a monthly basis unless and until there is no phone, writtenor direct contact with the borrower for more than 60 days after delinquency or the property hasbeen determined to be abandoned.

3. In such cases, the property inspection may not be used in any manner whatsoever to make acollection call or request for payment. If a collection call or request for payment is made, then thecost for the inspection fee shall be borne by the servicer as part of the liquidated damageprovision of the late fee/charge clause.

4. If the borrower or a family member of the borrower occupies the property, then Propertyinspections may not be taken more than once every 90 days if the account is delinquent.

SUSPENSE/UNAPPLIED ACCOUNTS

1. Money placed into any suspense or unapplied account shall be placed into a non-interest bearingaccount and monies deposited there shall be applied to a borrowers account no longer than 5days.

2. All monies contained in the suspense account shall first be applied to payments of outstandingand current principal, interest and escrow payments first and then to any amounts due for anyother assessed fee or charge.


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3. Upon application of the amounts in suspense, the posting date and corresponding interest appliedshall be based upon the date of receipt of the payment by the servicer or an agent or lock box ofthe servicer and not any date thereafter.

4. On the monthly statement, an explanation of suspense and unapplied activity shall be given andan explanation of why any amounts was placed into suspense at any time.

TAXES & INSURANCE{Escrowed & Non-Escrowed}

1. All taxes shall be paid timely and accurately to maximize all allowable discounts for early paymenon escrowed accounts. If taxes are not paid in such a fashion, the servicer will pay all penaltiesinterest and fees.

2. The Servicer will pay taxes for borrowers with delinquent taxes on non-escrowed accounts onlyafter first contacting the borrower and informing the borrower that delinquent taxes are to be paid.

3. Payment of delinquent taxes on non-escrowed accounts will occur 60 days prior to the last day toredeem the property before tax sale.

4. After such payment, the servicer will send the borrower a letter stating the date on which the taxeswere paid and the amount of the taxes paid.

5. Subsequent statements shall reflect such payments and any necessity for the borrower to paysuch tax amount on a monthly basis as part of any escrow account established.

6. Servicers will also timely and accurately pay insurance premiums for escrowed accounts.

7. If a servicer receives a cancellation notice from an insurance carrier, the servicer shall contact viaphone the agent and if necessary the homeowner 15 days prior to the expiration of coverage[including any grace period].

8. If payment has not been made, then the servicer shall pay the borrowers insurance policy and noforce place one of its own.

9. The amount of the policy shall be placed into an escrow account for the borrower.

10.If the borrowers insurance is not paid timely in established escrow accounts, then the servicer

shall pay all penalties, interest, or fees.

11.If a Servicer has not received updated insurance information on an escrowed account by 15 daysprior to the expiration of the coverage, a call will be placed to the agent, or, if necessary to thehomeowner, to assure the continuation of coverage.

12.Under no circumstance is force placed insurance coverage to be taken unless and until theexisting carrier refuses to insure the borrower for cancellation other than non-payment opremiums and the borrower has not secured another insurance carrier prior to cancellation.


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13.If force placed insurance coverage is obtained by the Servicer on the borrowers property then theborrower shall be notified within seven days of the coverage being taken and be informed of:

1. The amount of coverage and limits thereof;2. The terms for repayment of the coverage;3. The dates of coverage

14.Once coverage is placed, if at any time within the coverage dates the borrower secures insurance

on their property, then the Servicer will cancel such coverage on the date it receives notice ofsuch cancellation and adjust the borrowers account accordingly.

15.A credit for the unused portion of the insurance shall immediately be reflected upon the borrowersadvance or escrow account on the date of notice to the servicer and not on the date of actualrefund or adjustment by the force placed insurance carrier.

16.Any additional payment to escrow or an advance balance demanded by the servicer previouslyshall be immediately readjusted prior to the next monthly billing statement to reflect the new andcurrent payment information.

17. When a Servicer does not receive updated insurance information at the expiration of a borrowersinsurance coverage on a non-escrowed account, a series of calls and letters will be attempted toconfirm insurance.

18.If force placement of insurance is necessary due to the current carrier of the borrower refusal toreinsure, even after payment, the following steps will be performed if the previous step wasunsuccessful at obtaining insurance information.

19.Timing of the calls and letters shall be as follows:

Ten days after the lapse or, after a new loan boards, a call will be placed to the

borrowers agent or insurance carrier. First letter will be sent at 15 days.

Second letter will be sent at 40 days.

First call to the borrower will be made at the 50 th day. If the borrower does not answer,the Servicer will leave a message if practicable, concerning how to provide informationnecessary to confirm insurance.

Policy will be issued on the borrowers behalf and a certified letter will be sent to theborrower at day 60 advising him of the placement of the policy and the amount of theannual premiums.

Premium will be billed; payment analysis performed; and Notice of New Payment sentto borrower between days 70 and 80.

Second call to the borrower will be made before the 90 th day.

New payment becomes effective between the 120 th and 150 th day after the initiallapse in insurance coverage.

Upon proof of insurance coverage by the borrower, the following actions will occur:

Refund of all premiums paid during the overlapping coverage period will be processedwithin 5 days.

Additionally, any other fees or charges to the borrowers account during the overlappingcoverage period will be removed.


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Borrowers payment will be returned to the original amount within 10 days of thecancellation.

MORTGAGE SUNSHINE & MOONLIGHT PROVISION

1. A major complaint by borrowers is the ability to get information and documentation fromservicers regarding their loans. Such documentation includes master account histories,

2. As a fundamental right, a borrower should be entitled to receive, inspect and review anydocument, data or information in his or her mortgage file whether that information be in originalpaper form, electronically scanned form or in ASCII text and data in a computerized database,servicing or accounting system.

3. Upon request and the payment of a reasonable fee, borrowers shall be provided with alinformation in their mortgage file.

4. Key and chief among such a request would be the master ledger and servicing recordsof their account with an appropriate key code for the current servicers records and

system and each prior servicer and their records and systems.

5. This is vital should the borrower wish to secure an independent audit of their accountby a mortgage-auditing firm.

6. Furthermore, the borrower shall be entitled upon request or upon a RESPA QWR letter to theservicer to receive the following:

All bills, invoices, payments, ledgers, and cancelled checks and other such supportingdocumentation for any charge, fee, credit, debit or assessment to a borrowers account;

The complete chain of title of assignment of any rights to the borrowers note or

mortgage regardless of whether publicly recorded or not. All BPOs, Inspection and appraisal reports done on the borrowers property by currentand past servicers;

All current endorsements on the borrowers mortgage and/or promissory note;

SERVICING

1. Borrowers shall be entitled to know all companies that are servicing their loan as welas their respective roles. No effort should be made by any servicer to disguise theactual entity that the borrower may have personal, written or telephonic contact with.

2. As such, all current and past contact information on all Master Servicers, ServicersSub-Servicers, Special Servicers, Document Custodians and Trustees should beprovided to the borrower upon request.

3. In addition, if a sub-servicer or special servicer is servicing a borrowers account andcontact is made via telephone or written communication, the sub-servicer shall identifyitself and provide the borrower its name and address upon request and the names,addresses and phone numbers of the master servicer, servicer and trustee the sub orspecial servicer is servicing the borrowers account for.


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CASHIERING/POSTING OF PAYMENTS

1. Any payment received by the borrower shall always be applied first to all past due payments oprincipal, interest and escrow before any application to assessed charges for late fee.

2. Regardless of how made, and the lack of any written notice with the payment coupon, if the

borrowers account is current and there are no outstanding payments or fees due, ANYamount contained in the payment that is in excess of all then current and past amounts dueshall then be applied immediately toward the principal balance thereby reducing suchoutstanding balance to the borrower. In no circumstance, shall such an amount be placed intoan unapplied or suspense account.

3. Mortgage payments that (singly or in the aggregate) are $25 or less of the expected principaand interest (P&I) amount will be posted to the account and the shortage amount will beadvanced on behalf of the borrower. This will advance the borrowers due date. This processapplies even if a borrowers account has been reanalyzed and additional payments are oweddue to placement of insurance.

4. Payoffs short less than $100 will be posted. The shortage amount will be advanced to theborrower. Reconveyance of the title will be processed as paid in full. An attempt will be madeto collect the shortage amount from the borrower.

5. End of day processing will be extended to 8:30pm (mountain time) on the day late charges aretypically assessed to give borrowers extra time to make a payment via SpeedPay, EZ PayWestern Union or other similar instant debiting or credit service and thereby avoid a latecharge.

6. Borrowers shall be able to arrange such payments either through the IVR unit or through a

web-based product accessed through the Servicers web site. Additionally, borrowers maymake check-by-phone arrangements with customer service on current accounts or collectionsregarding delinquent accounts up to the point of foreclosure.

7. Check by Phone arrangements will be flexible and may be future dated to meet the borrowersfinancing needs.

2004 report on predatory lending & servicing practices & their effect on corporate compliance,...

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