against foreclosures. let me introduce supervisors avalos and campos. supervisor avalos: thank you very much, colleagues. thank you, mr. chairman. i want to take the opportunity to welcome and thank all the members of the public who are here for this item. i know there are residents from throughout the city and county of san francisco have been working on the issue of foreclosures and the crisis we are facing. as the supervisor for district 9, it has been my honor to call for this hearing. i want to thank supervisors avalos, kim, and cohen for their sponsorship.

and supervisor -- and supervisor olague as well. the hearing is about a very important report that was commissioned by the office of -- that was commissioned. it is a foreclosure crisis in california, a crisis of compliance. what it does is we have a city agency that is taking a very close look at what is happening around foreclosures. it is an important report that looks at a sample of about 382 loans and foreclosure is out of the much larger number of foreclosures that took place in the city and county of san francisco. 382 reviewed by the report.

the findings of this reports are very disturbing. in a very short moment, we will hear directly from -- to speak about the specifics of this report. what the report concludes is that we have a crisis. if you look at the number -- at these loans that were scrutinized by the reports, it there are a number of problems that are identified in terms of compliance with the legal requirements that are in place to protect homeowners. unless something changes and we do something in response to this, we find ourselves in a situation where a number of people have their legal rights and interest being trampled upon. i am very grateful for calling

for this report. i know there will be number of questions for him. besides -- we also have the consulting firm that did the report. >> thank you, supervisors. i want to walk you through that. before i begin, i want no one of the items that you passed was asking departments to be proactive and to take a hard look at how we can participate in forestalling this crisis. i do want to give you a very brief update as to what we have been doing in our office.

we have been working closely with a number of our home ownership counselors and making sure that we are constantly referring people who wore on the brink of losing their homes. what we have done is every time there is a default letter that is recorded in our office, they get a letter from us telling them they are facing foreclosure and bad there are non-profit housing counselors -- that there are non-profit housing counselors that can assist them. tenants for paying the rent and they were getting walked out of their homes without even knowing that because the documents go to the property owner. if we believe property is occupy, the letter goes to the

owner at the different address and to the actual site address, we will send a letter letting tenants know. given the just cause laws, just because there is a foreclosure is not a cause for eviction. i am proud to help formulate the san francisco working group, where we looked at a number of variations in terms of predatory lending, affordable housing, highlighting many of the issues. >> can i stop you for one moment? i have to make an announcement that we have achieved a quorum of the board with six of the 11th. this is properly noticed as a meeting, so please continue. >> this working group, which is with the board, myself, work together to identify a number of recommendations.

the city has continued to push for an to advocate for. just last week, i did want to note that the letters are in english, spanish, and chinese. in 2011, we mailed over 1000 of these letters. that gives you an idea of what led us to this audit. given this serious issue, not just in san francisco, but statewide, we felt compelled to take all look at our records. on the back of a reporter in massachusetts, he commissioned the first report of its kind in the country. what the commission found was very similar to what we found. part of what we wanted to look at was let's take a look at the scope of the audit and the purpose of what it is. we want to understand door for closure process and make sure that everyone understands that

no matter what their mortgage is, it is easily understandable. we also wanted to create more dialogue to discuss with all the stakeholders, all the different government agencies, community organizations, lenders, about what we could do to fix the system. this report shows that the system is completely broken. our audit only encompasses all land records here in our office. however, chances are, because the players are not just local, we anticipate that many of the issues we are seeing here are probably happening up and down the state. delores -- the laws are the same and the players are very similar. in california, we have a non -- you can foreclose without having to go through a judge.

the process is very important. if you are not following the process, there is no accountability mechanism. there is no way for anybody to provide a check. in other states, the judge would provide a check for the different agencies. in this state, we do not have that. we have the notice of default, a notice of trustees sale, and the trust deee deed. it is a three-step process, a minimum of 140 days. the law is all prescribed. if you look at your chart, you can see the red is for most of the foreclosures are going on. south, southeast part of san francisco. district 9, 10, and 11. district 6, obviously.

in yellow -- >> do we have copies for the members of the committee? [inaudible] thank you. >> the yellow area is the area where we have the next highest concentration. south of market, mission, parts of the sunset. green means it is less of an issue. this is where the highest concentration of issues are. most people have been first-time home buyers, people who are in low to moderate income neighborhoods. this is to reiterate what the supervisor said.

99% of the time, we have a violation of law or an irregularity. we saw documents that were back dated two years. 75% of the foreclosures had three or more issues. this is a problem because we having nontraditional foreclosures stake. there is no accountability, so we are assuming the foreclosures are being followed in a legal manner. clearly, the mortgage industry has decided to compromise our land records by filing these foreclosures in a process that is not in accordance with the law. this needs to be clarified. we need to make sure the law needs to be clarified or we need increased regulation or we need to sit down with the industry players. how do we create a process that

works? i do not think it is working for anybody. what did we focus on? i want to go through what we focused on. >> let me say that supervisor avalos and campos want to make some opening remarks as well as comments. supervisor avalos: ok, thank you. i have called for a hearing and brought forth a resolution. in the resolution, i want to

thank you for your call sponsorship. -- co-sponsorship. [applause] i come to my work on the foreclosure crisis that we still have in san francisco through a personal stake in what is going on as well as somebody who is representing a district to is very hard hit by the foreclosure crisis. while there are parts of san francisco that might not feel we have a foreclosure crisis, there are certain parts of the city where we actually do. we saw an indication of that on the map, where it was red in parts of district 11, district 10, and part of district 6.

as a city, we are hard pressed about what we can do to find solutions to this crisis. it has been around for a number of years already. in 2009, i had sponsored -- eviction protections to tenants in buildings where a foreclosures happened. supervisor wiener has been looking at how we can support middle-class households to maintain property. we are seeing that a lot of things we want to be able to do to protect households against default are tenuous, at best. this hearing is to look at how we can explore some of those options and support the resolution to support some of the efforts happening there can be some solutions found at the state and federal level where

work is being done. the resolution i have today is the knowledge in the work of the attorney general, who has sponsored several bills with people and our sacramento elected offices they're giving protection to home owners that would help them avoid a foreclosure and to make sure we're holding our banks accountable to make sure we can help property owners maintain their properties. the work we have done at the state and local level come out of evidence presented by various organizations and government bodies that show that the banks have not been transparent, have not been working in the best interest of consumers. just this past november the federal reserve banks had

deemed wells fargo $85 million. we have also seen the california reinvestment coalition and the association of community -- i will get the name wrong. they did a report about how our for closure crisis is affecting our communities. we have the audit showing that we have got some evidence of the banks not working well behind the scenes, working in a fraudulent way behind the scenes. moving out mortgages entitles rapidly to seek foreclosures. all of these are referenced in the resolution we have today. i want to make sure that as a

city, we can do all that we can, siding with the state and federal agencies seeking remedies am proposing a moratorium on foreclosures while we are looking at investigating the irregularities in the banking industry. while we're looking at legislation that could provide a respite for households against foreclosures are being enacted in sacramento. i think it is important that we create this kind of paused, especially when we see these irregularities by the banks. that property is our assets and our wealth that keep are committed to hold. i want to thank my colleagues for their work on this. i look forward to a robust discussion as we move forward today. i want to see what we can look for in the months to come that

could really support our households in the city. thank you very much. [applause] superisor mar: were there other colleagues that would like to make any remarks? supervisor campos: i will save my remarks. i have a number of questions to follow up on the presentation of the report. maybe supervisor olague would like to make some comments. supervisor olague: it is important to keep in mind that when we address the foreclosure issue, we should also consider it from a tenant perspective. the effects of foreclosure on the city demonstrate how diminished property values and property tax revenues have- budgetary impact overall. however, we must also consider the impacts of foreclosure on thousands of renters in the state, particularly those here

in san francisco. renters are overlooked in the foreclosure prices and are victims of this process. this means that hundreds of families in san francisco each year have the potential to lose access to rental housing due to foreclosure. they usually are unaware of the impending action and are left with minimal options and even less support. we cannot allow the rental future, credit history, and housing stability of families in san francisco to hinge on foreclosures that are processed with the regular paperwork or the robo signing for the foreclosure documents. a land mine in to this legislation that my colleagues are presenting, and my office will continue to support policy that provides a safety net for people in san francisco.

supervisor mar: thank you very much. [applause] supervisor olague: i will continued to be involved with this. questioned later. supervisor mar: with your staff, as well. >> board of supervisors, good afternoon. my name is -- i lead the firm's regulatory compliance, structure, and litigation processes. i am the co-author of a report titled to a bank foreclosure in california, a crisis of compliance." prior to this, i was a ceo bet was -- of a company that had regulatory compliance solutions for the mortgage industry. i have held positions with rbs

securities, nomura, and goldman sachs, where i covered financial institutions and specialized in mortgage-related structured products. a frequently writes -- i frequently write and speak at conferences. in 2008, i was recognized as a future leader by the mortgage banking physician and and also a member of the california bar. it is a regulatory consulting firm specializing in the investigation and audit services. we did the work with commercial appliances, including mortgage businesses, regulators, and enforcement agencies, attorneys for mortgage-backed securities holders and paternities -- and eternities for others. i am here at your request to provide some background information on the information included in the report. as was explained and reported in section 3 of the report, its

purpose was to identify potential irregularities in the city and county public land records in order to improve compliance and to affect legislator changed so that would allow the law to more adequately reflect the modern mortgage market. to accomplish this, and that have a powerpoint here, to accomplish this, there are documents filed at the city and county assessor's office with a single family residential property transferred in nonjudicial foreclosure sales. the sample was randomly sampled by staff and included 382 single-family residential properties that underwent nonjudicial foreclosure sales occurring between january 2009 and october 2011. the sample properties included all of the san francisco is it goods and comprised proportionately more loans in areas that have higher concentrations of foreclosures.

over this period, there were 2405 nonjudicial foreclosure sales. the sample represents approximately 16% of the total of such nonjudicial foreclosure sales. we reviewed all of the relevant recorded documents, including notices of default, substitutions of trustees, notices of trustees sales, and the trust deed deeds upon sale. we reviewed these documents for general defects, compliance with the substance requirements of notices and for suspicious activity, such as backdating, execution, and robo signing. we found that the recorded documents only provided a partial picture of these transactions for the interested parties involved. part of the reason for this is that the current reporting requirements under applicable state laws have some inadequacies.

the efficacy of these laws is what the audit intended to illustrate. therefore, in order to provide the assessor greater visibility into these transactions and to promote a richer context for understanding the wide range of policy and legislative alternatives, we also performed and additional analysis that consulted other sources. we reviewed the extensive information using a variety of public and private sources, including federal filings. usually, the filings with the securities and exchange commission in connection with mortgage-backed securities. we also consulted a database for the mortgage electronic registration system, known in the industry by an acronym. and other databases providing mortgage-backed dated information. we used tools to try to create

as much as possible an accurate chain of title and to identify all relevant parties and foreclosure sales. the villone reviews were performed by qualified mortgage and legal professionals utilizing the proprietary auditing software developed by attorneys who are expert in mortgage origination, securitization, in foreclosure sales. this chart summarizes our findings. we found that 75% of the subject properties had exceptions relating to assignments. assignments refers to the transfer of the deeds of trust from one beneficiary to another, usually in connection with the sale. the irregularities included recordation of conflicting assignments, conflicting beneficiaries or different beneficiaries, potential issues related to the timing of the recordation of those and

potentially related to the authority to execute such transfers. in terms of notice of default, nod's must be filed for the setting of the nonjudicial foreclosure process going. an affidavit attesting to the thames to contact the bar and explore alternatives to foreclosure. this is required under a california could, section 29- 23.5. the next category is substitutions. we found that 85% of the subject properties that exceptions relating to substitutions. i will explain what substitutions are. in many instances, the beneficiary of the deed of trust will replace or substitute the regional trusty with another

trusty. this substituted trustees typically specializes in defaults and handles foreclosures. the substitution requires a document, entitled the substitution of trustees. irregularities with the substitution of trustees included issues related to the timing of the recordation and questions related to the authority of the party making the substitution. this is important because only one party can be essentially in charge of a foreclosure sale, and if there is confusion as to which party has that authority, it could invalidate the sale. the next category is not's or notice of trustees sales. these issues included in proper timing of the filing of the notices, planned sales earlier, and questions related to the

authority executing the not's. and we found some that suspicious activities, which we defined as backdating documents, incorrectly executed documents, and possible robo cited. finally, we looked at findings related to conflicts between the public land records and what was recorded or registered in one ackerman. supervisor mar: what is that? >> it is a private registry outside the public land records where beneficiaries to the deed of trust are recorded and transfers are made outside. so instead of recording assignments, the transfers would just be maintained in the

private registry outside of the public land records. what we are looking for is instances where the investor as recorded, the owner is recorded, and it conflicted with the beneficiary in the public land records, the beneficiary and the trustees in the public land records. information was available from the database on 192 of the 382 center properties. of that 192 loans, we found conflict in 112 of those loans resulting in a 58% exception rate, meaning what was in the database, who owns the long bear, was different from who was recorded with the deed of trust in the public land records. i think the foreclosure in california report adequately describes our findings in greater detail, so i will not

take up any more time repeating these findings. i think you for this opportunity to explain our findings and summary in this report. thank you. [applause] supervisor mar: thank you, colleagues. supervisor campos? supervisor campos: thank you. i want to applaud the recorder and the company for the review. my questions have to do with the fact that my fans of the next step in this process is to figure out what we can do with the information in this report