Detroit Law Firm Hertz Schram May Be Bilking Deutsche Bank Bondholders In A Foreclosure Battle With A U.S. Marine With Cancer

Deutsche Bank and Deutsche Bank bondholders may not be responsible for a nine-year modification/foreclosure fight. Deutsche Bank has been trying to foreclose on a Marine Corps veteran with cancer who clearly qualifies for a loan modification.

This nine-year duel has cost Deutsche Bank bondholders nearly $250,000 in unnecessary legal fees. Ocwen hired suburban Detroit law firm Hertz Schram. Ocwen Financial is servicing the loan for Deutsche Bank bondholders. They are also collecting advance fees from Deutsche Bank bondholders to service the loan. They are using these advanced fees to pay Hertz Schram.

Yet, Deutsche Bank bondholders are not the only ones wasting money in this fight. Troy and Lea Etts have spent nearly $30,000 in attorney fees to fight for their home. The Etts could have used this money to pay Deutsche Bank and bring the loan current.

The story begins nearly a decade ago. The Ettses received an unsolicited loan modification offer from Litton Loan Servicing (who was servicing the loan for Deutsche Bank bondholders) to convert their adjustable rate loan to a fixed rate mortgage.

Everything was fine until 2009. Troy Etts was diagnosed with leukemia and was unable to work due to the illness and treatments. Troy’s loss of income meant the family now had to rely on Lea’s income as a high school guidance counselor.

Endless Cycle Of Sending Documents To Get A Loan Modification

Lea Etts requested a loan modification from Litton Loan Servicing in order to be proactive. Ocwen later acquired Litton. Both servicers were servicing the loan for a Deutsche Bank bondholders.

Litton had informed her that Deutsche Bank on behalf of Deutsche Bank bondholders had approved them for a temporary modification. Lea Etts complied with every request for documentation. Yet, the Etts were denied a permanent modification in the fall of 2009.

Litton claimed she failed to send them all the paperwork necessary to satisfy the conditions for a permanent modification. This claim is debunked by written confirmations to Lea Etts from Litton and later Ocwen. 

For the next three years, the Ettses sought further assistance from Litton and later Ocwen. The Etts complied with every request from these two servicers. Lea sent Litton and Ocwen countless submissions of hundreds of pages of requested documents. These documents clearly show the Ettses despite their hardship qualified for a loan modification. 

Ocwen told Lea Etts on September 2, 2012, that their request was “under review.”  

The Etts soon learned they were victims of “dual tracking” by Ocwen. Ocwen later claimed they were following the orders of Deutsche Bank and Deutsche Bank bondholders.

Loan Modification Attempt Turns Into A Foreclosure Nightmare

The Ettses discovered their house went to foreclosure on October 25, 2012.  Randall S. Miller & Associates, P.C.posted a “Notice of Abandonment” on their front door. It was obvious the Etts resided in the home because the house was adorned with Halloween decorations. 

The Ettses hired attorney Kelli Meeks to contest the foreclosure. Ocwen on behalf of the Deutsche Bank bondholders then fired Randall S. Miller & Associates, P.C. Consequently, Ocwen hired Hertz Schram who successfully argued to have the case moved to federal court. This added significant cost to everyone involved. 

Lea Etts’ attempts to negotiate a loan modification have been thwarted by Lapin. Lapin keeps pointing the finger at Deutsche Bank and Deutsche Bank bondholders. She is claiming her clients don’t allow second loan modifications.

Lapin is ignoring the fact Litton voluntarily gave the Etts the first loan modification. 

Lapin is using an amendment to the PSA for the Trust who holds the note. The unrecorded PSA states the Trust will not entertain second modification requests. This claim contradicts federal laws regarding HAMP guidelines. The SEC also states an amendment must be filed: 

Deutsche Bank Tells Servicers And Foreclosure Mills To Quit Making Them The Bad Guy

It has become very clear Lapin is ignoring the actions of her own client. Deutsche Bank sent a memo to all of its servicers including Ocwen in October 2010 instructing them to cease and desist from using Deutsche Bank and Deutsche Bank bondholders as scapegoats for not wanting to modify loans.

You can read the 10-page memo below. This memo was in response to an investigation done in 2010 by German media outlet Der Spiegel and MFI-Miami.

Deutsche Bank Memo on Loan Mods by Steve Dibert

Propublica quoted David Co of Deutsche Bank in 2010. David Co wrote the above memo. Karen Weise writes:

Investor-owned mortgages represent more than a third of trial and permanent modifications in the government’s program. Under the program, servicers must modify the loans of qualified borrowers unless contracts with investors prohibit the modification, or if calculations determine that the investors won’t benefit from a modification. Investors’ contracts rarely prohibit modifications, and at times, ProPublica found, they have been blamed for denials even though other mortgages owned by the same investors have been modified.

Even when contracts with investors do have restrictions, servicers don’t appear to be following federal requirements that they ask investors for waivers to allow modifications.

Such requests “never happen,” says David Co, a director at Deutsche Bank’s department that oversees 1,600 residential securities, the complex bundles of mortgages sold to investors.

Hertz Schram Also Appears To be Ignoring Ocwen

Lapin also seems to be ignoring public statements made by Ocwen. Former Ocwen CEO Ron Faris told Shelter Force in 2011:

In the private-label security world, trust me, I heard a lot of those same stories very early on. And yet, when we actually read our documents, we found less than 10 percent, closer to only about 5 percent of the time, was there any true restriction on how you could work out a loan. Except for that small percentage, our PSAs are silent about modifications. But every PSA has one thing in common: they dictate that the servicer must service loans, and resolve delinquencies, in the best interest of the investor, ie, the loan owner. So where our net present value analysis shows that a principal reduction modification that is sustainable by the homeowner will likely return more cash flow to the investor than a foreclosure, we are not only legally permitted to do that type of mod, we are arguably required to do it.

As long as you were working out a loan with the intent of maximizing the value for the trust or the investor, there was nothing specific that said you couldn’t lower an interest rate or you couldn’t extend the amortization period, or you couldn’t do a principal reduction. Even though people said over and over that that’s why they couldn’t do anything, it really did not exist in the vast majority of the documents.

Investors still, I think from time to time, question whether modifications are what should be done to maximize their investment. But as far as explicit contractual restrictions, they generally were found not to exist.

Is Hertz Schram Looking At Deutsche Bank As Cash Cow?

If Deutsche Bank executives have stated they will modify loans as long as they make sense to Deutsche Bank bondholders and Ocwen is saying they will modify loans that make sense, then why are the Ettses not being allowed to modify their loan?

At this point, it appears that Hertz Schram is treating Deutsche Bank bondholders as their cash cow. Hertz Schram has a vested interest in dragging out litigation in this case as long as possible in order to keep milking fees indirectly from the various pension funds and retirement funds who make up the majority of Deutsche Bank bondholders.