Bond Investors to Complain Over Bearing Costs of Robo-Signing

Mortgage-bond investors represented by Dallas lawyer Talcott Franklin will send letters to securities trustees complaining that they shouldn’t bear the costs of loan servicers’ so-called robo-signing.

The investors, who Franklin has said own more than $500 billion of the securities, are “pretty disturbed” that mortgage-bond trusts are being forced to pay penalties after loan servicers including Detroit-based Ally Financial Inc. filed false affidavits in foreclosure cases, he said. Judges are forcing the trusts to cover homeowners’ attorney fees when servicer misdeeds are discovered, he said.

“Look who got sanctioned,” Franklin said today at a conference in New York organized by law firm Grais & Ellsworth LLP. “It wasn’t the servicer, it was the holder of the note.”

Franklin said the group of investors coordinating through his firm’s RMBS Investor Clearing House now own more than 25 percent of so-called voting rights for about 2,600 mortgage securitizations, and more than 50 percent for about 1,150 deals.

To contact the reporter on this story: Jody Shenn in New York at jshenn@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Oct. 27 (Bloomberg) -- James Lockhart, vice chairman for WL Ross & Co., talks about the impact of a foreclosure freeze on the U.S. housing market. Lockhart, former director of the Office of Federal Housing Enterprise Oversight, also discusses the future of Fannie Mae and Freddie Mac, and the outlook for Irish and U.K. financials. (Source: Bloomberg)