In this episode:

The hidden world of mortgage fraud and litigation comes alive in this eye-opening conversation with Anna DeSimone, owner of Housing Research LLC and a preeminent expert in residential mortgage lending since the mid-1980s.

The financial services industry presents unique challenges for expert witnesses due to its thousands of state and federal regulations, each with numerous nuances and sub-rules. DeSimone walks us through her process of evaluating cases, from spreading dozens of appraisals across conference tables to identify patterns of fraud to preparing for grueling 12-hour court testimonies. Her insights into how seemingly minor errors can result in multi-million-dollar settlements illuminate the high stakes of regulatory compliance.

Whether you’re in the financial services industry, legal profession, or simply a homeowner, this conversation offers invaluable wisdom about the complex interplay of regulations, technology, and human behavior in the mortgage market. Subscribe now to hear more expert insights that go beyond the headlines to reveal the true dynamics of professional fields.

Note:   Transcript has been lightly edited for clarity

Host: Noah Bolmer, Round Table Group

Guest: Anna DeSimone, Owner of Housing Research, LLC

Noah Bolmer: Welcome to Engaging Experts, I’m your host, Noah Bolmer, and I’m excited to welcome Anna DeSimone to the show. Ms. DeSimone is the owner of Housing Research LLC, where she’s a consultant specializing in residential mortgage lending. She’s an award-winning author and an expert in mortgage fraud, predatory lending, compliance, loan servicing and more. Ms. DeSimone, thank you for joining me today on Engaging Experts.

Anna DeSimone: Thank you for inviting me, Noah. Happy to be here.

Noah Bolmer: You’ve been in mortgage and lending advisory services since, the mid 1980s at least. How did you first become involved as an expert witness?

Anna DeSimone: I started my business in 1986. I did a lot of writing and publishing and because I had written a series of three books that were commissioned by President Clinton, under a White House executive order, I was well known as an authority on redlining and mortgage discrimination. Some of the earlier cases that I worked on had to do with predatory lending, unfair treatment, compliance to the Fair Housing Act and it grew. I have to say that on 100% of the cases that I have worked on have all resulted in favorable outcomes for the lender. I’m proud of that. But as you can appreciate, there are so many different companies and types of businesses and industries that Round Table Group is dealing with, but the financial services industry is unique because it has thousands of state and federal regulations and within those regulations, there are many different nuances and sub rules. When there is litigation between a plaintiff and a defendant and I have always represented mortgage lenders or banks who are the defendants, there’s always something that’s going on with the plaintiff. In most, not all, of my cases, I’ve found that the plaintiff was not acting honestly.

They were engaged in fraud, errors, omissions, and were providing discrepant information. I find that when real estate values go down, people get nervous. They don’t want to pay the mortgage anymore. They will look for a reason to get out of it. One of the most important lesson that I have learned from discovery, which entails reviewing thousands of documents, and listening to recorded phone call conversations with customer service representatives, you realize that there’s always another side of the story.

Noah Bolmer: Let me ask you this, when you get that initial phone call and you’re deciding whether or not this is a case that you want to take, how much of that do you find out before you get started and [begin] reading thousands of pages of discovery? How do you evaluate it at a higher level before you say, “Yes, I will go ahead and be your expert.”

Anna DeSimone: What I find out is I might to have a Zoom call or an initial phone call with the law firm that’s hiring me and usually with the mutual e-mail confirmations of non-disclosure they will send me a copy of the complaint or some confidential document which I’ll read over. It’s common in unfair lending or predatory lending cases.

What I have found is that the focus is strongly centered around the defendant’s counsel wanting to prove that no laws were broken by the bank or the mortgage lender. Typically, in the case of foreclosure, they want me to opine on the fact that everything was done by the book and in accordance with the regulations. There’s always a bit of history that comes out which makes me think there’s more to the story. When you’re trying to prove in a court of law that the mortgage lender or the mortgage servicing company did comply with the rules, that doesn’t always result in a favorable outcome because there are hundreds and hundreds of distressed homeowners out there. Through sickness in their family, loss of job or some other reason, they can’t afford to pay for their house, and they may be in foreclosure. All of that makes sense, except that once you start looking at documents you see that people were not being honest.

I worked on the case, which was a half million-dollar suit where a borrower refused to leave his house after a foreclosure. He stayed in the house for three years and was suing his mortgage lender for half a million dollars for stress. All I was asked to do is prove that the mortgage servicer did everything right. What I found out was this person had a $1,000 a month mortgage payment and was receiving income from a trust fund in the hundreds of thousands of dollars over a 10-year period. The mistake that he made was that he signed a federal document saying my income is zero because three times the lender tried to work with him, gave him a reduced interest rate called a loan modification, or they did what’s called a payment pause. They didn’t charge him his mortgage payment for six months. Now, what helped win this case was the fact that to say the borrower was acting dishonestly carries weight and then you explain how. When you say someone signed a document that their income was zero under a federal bailout program that’s a different story.

When I’m being hired as an expert witness, I’d like to anticipate all the possibilities because even though the suit is about the financial institution complying with the law—did they send the correct document? Was it properly filled out? Was it issued in a timely manner in accordance with federal regulation or in some cases of state regulation? That may not be the only thing. I am not going to overlook fraud if it’s in the file.

Noah Bolmer: It sounds like there’s a good deal of forensic analysis in your particular field, when you’re going through all of this stuff. When you receive all of these files in your drawer, all of these conclusions looking for fraud, do you ever feel like you’re inundated with way too much paperwork? When you have thousands of pages, how do you decide that here’s a stack of what’s important to go through with a fine-tooth comb? Here’s something that I’m going to browse, and this is probably not important.

Anna DeSimone: What I want to do is to keep the cost down and controlled. I don’t want to do 100 hours of work and then surprise the company that hired me with a huge bill. I have never asked for a retainer up front. I know that’s not the customary role, but I feel my work will prove itself. What I do is I get an inkling when I open—sometimes I get an inkling from reading the complaint and I may listen to a couple of—I’ll read a couple of depositions from the plaintiff, or I will listen to a tape of a deposition. I will tell the company that hired me, I should be looking at more documentation. They’ll send everything but of course it takes a lot of time to look through the discovery. Just so you know, it’s not always the home buyer or the mortgage borrower. I’ve worked on cases where a residential real estate appraiser appraised as many as 30 or 40 homes in different parts of the country. I’ve had more than one appraisal fraud case. What I do is I spread copies of all these appraisals out on my dining room table, or when I did this in the office at a large conference table, and you begin to see the similarities among all the different appraisals. Not only is it the time looking at documents, sometimes it’s worthwhile spending the extra time to print the documents out, especially if you’re looking for fraud. Fraudsters do make the same mistake over and over again.

Noah Bolmer: As somebody who is primarily working for—solely working for the defendant in these matters, do you find yourself writing lots of what they call rebuttal reports, where instead of making an expert witness report full cloth, you’re taking the opponent’s expert witness report and dissecting it line for line? Do you do a lot of that sort of work?

Anna DeSimone: I’ve had to dissect other expert witness reports. When a homeowner claimed that their loan was predatory. They said they had an adjustable-rate mortgage, and they didn’t know it was adjusting. I worked on six cases in one state in the United States and four out of the six cases were handled by a nonprofit legal aid, where the attorney representing the plaintiff believed everything they said. They said, “I didn’t understand what I was doing.” When in one particular case the plaintiff’s counsel was absolutely adamant that the borrower was paying $75,000 more over the life of the loan than they would have paid if they hadn’t financed. It was a rate reduction, and the mortgage payment probably dropped $100 a month.

Noah Bolmer: Sure.

Anna DeSimone: The way I handled it, we ended up getting a summary judgment, as I said, $25 a week to a family means dinner on the table. And these people aren’t thinking 30 years from now, paying that extra $75,000. They’re thinking about those hundred bucks a week, every single week. Or that $25 a week on $100 reduction in their mortgage payment. When people choose to refinance it is their decision and they understand and no matter, you can keep telling them for over 30 years, you’re going to pay more. They’re looking at the here and now. That’s the reality of a homeowner. The case that I worked on that turned out to be a precedent win in the Ninth Federal Circuit were homeowners who said that they didn’t receive a copy of a specific document. Once I looked at the file, I found out they were playing this game multiple times, and we ended up winning the case. I had to testify in court for twelve hours. Four hours one day, eight hours the next day, and it’s hard to prove when somebody is being dishonest because you can’t blurt that out. The cross examination showed it.

Noah Bolmer: I want to ask about that because I’ve had a lot of expert witnesses that talk about grueling depositions that go on for days and cross examinations that are extremely tense and difficult. Tell me a bit about your preparation process. How do you get ready for what is potentially going to be a lengthy deposition or difficult cross-examination?

Anna DeSimone: I anticipate that the plaintiff’s attorney has certain motives and one of them is to discredit me. They can discredit you, even if you’ve been in the business world for thirty or forty years. They can discredit you for what you majored in college fifty years ago. In the mortgage lending business, what you did five months ago is already outdated and so I anticipate that. I’m prepared to answer as best I can, but they also sometimes want to focus narrowly on where you worked.

I was speaking with a hiring manager on a large consulting project recently. They were looking for expertise on a specific type of servicing software. They were looking at resumes that said people were vice president of a mortgage servicing company for twenty-seven years and they were hands on with this software program. I said to this HR person, “I had a hundred clients around the country that used the software. We had a license to go into that software program, and my auditors would complete their audits.” They were very familiar—I wrote the checklist for auditing the software. If I only had one job, I would only know what my bank did. When you’re a consultant and you have 100 clients, you know what 100 banks do. You get the idea. If there’s a weak link in an organization, a lot of compliance—while there’s litigation going on all over the United States right now, much of it is from state banking regulators.

There was a case in Massachusetts that just settled for 2.3 million and it was a minor mathematical error made in the truth-in-lending disclosure that resulted in a half million-dollar restitution to borrowers, and two million dollars to the mortgage lender. The State of California just settled on a multi-million-dollar case and again it was errors. When I first started my consulting company 40 years ago, I ended up with fifty employees, including twenty-five staff attorneys. I’ve have a lot of experience in regulatory compliance consulting. And what I found was when you have systemic errors and financial regulation in a bank, a financial institution, or a credit union that goes on for years and years, it’s because the manager said, “This is the way we always did it.” When technology was first introduced in the 1980s, there were people that were still running companies using three by five index cards and systems. Then, in the 1990s and early 2000s, there were a lot of companies running on legacy systems. So, when conversions took place to go to more advanced technology, [many] times the new system couldn’t fully connect with the old system. People would say, “Why do we need due diligence? Why do we need a compliance check? Why do we need to beta test this?” If the engineer said, “This should work.” It should work. The problem is engineers that build software applications don’t understand the intricacies of per diem interest, which happens to be the Massachusetts case. It’s how many days interest can you charge a borrower at a closing. Like I said, what seems to be pennies cost the lender two and half, almost three million dollars, so, yes, outside points of view can help. That’s what I can- being an expert witness in many ways is not like being a consultant.

Noah Bolmer: You mentioned working out of the Ninth Circuit for a case. You have to stay current in lots of different laws that’s ever changing in an incredibly dynamic field. Tell me, what is it like keeping abreast of all the new laws, rules, regulations, even norms and technologies as they change? Then, what’s it like when you get hired into a new venue that you haven’t worked in before? You might have to do some research and find out what the laws are in that particular venue? How do you keep it all straight?

Anna DeSimone: As soon as I get a call, it depends on where the venue is. I check the laws on the topic of predatory lending. It could be something to do with reverse mortgages, which applies to seniors and there are special laws for that. But I’m an industry news junkie. How I prepare for being an expert witness is that I am always anticipating where the homeowners in America are going to feel the most stress. In areas like Nevada where we’ve had climate change and the dryness has caused—some of the foundations are collapsing because of the lack of water, with droughts. Then, we’ve had wildfire issues. We’ve had a lot of weather-related disasters in America and flooding. When we see a handful of states in America where property values are declining, it is not from lack of jobs or economic factors. Some of it has to do with weather related disasters. It might have to do with the lack of hazard insurance. I have worked on some hazard insurance cases which resulted successfully for the defense. I like to always think why is there a legal case? What is happening here and why? What is causing this borrower to say they didn’t know they had an adjustable-rate mortgage, or they didn’t know what a Zombie mortgage was. They didn’t realize there was a balloon payment. Nobody ever told them, and they’re scared.

What we’re going to see in the next two years, is there’s a slew of litigation in two areas. One of them will be borrowers who feel that they were pushed into a program or buying a home that wasn’t right for them. Some of those will be from the lack of transparency of real estate brokers. Because of the changes in commission, real estate agents are doing a lot of sneaky things. They’re pocketing listings. They’re trying to make as much money—industries who got rich want to sustain their lifestyle.

The other type of litigation that we are going to see in America in the next two years is going to be on the business-to-business level. The number of loans that are originated by mortgage brokers continues to grow each year. Five years ago, brokers had 20 or 30% of the volume in America. Now, it’s like 40 to 50%. There’s a growth in no-income check type mortgages. Wholesale lenders are eager for business and there’s an over-reliance of artificial technology, so it’s a race to the bottom. The brokers are submitting loans to four or five wholesalers to see who can give them the fastest service. The path to the least resistance. Low rate, fast closing, and the least amount of paperwork. The wholesalers don’t want to lose the business, so they use their AI systems to approve everything, and they close the loan. Six months or a year later, you find out that there were some defects in the loan. There was a puffed-up appraisal. Maybe the borrower—there was some [inaudible] in there and what’s happening is there has been a big jump in what we call repurchases. The wholesaler will fund the loan for a half million dollars, they find a defect, go back to the broker and say, “You owe me half-a-million-dollars. You’re going to buy this loan back.”

This is the kind of—the litigation starts where who should have done their due diligence? That’s where I come in. I’ll say, “If you’re using an AI supported tool and there’s no backup method that involves human eyes, you have to take some accountability with the fact that this was a loan that shouldn’t have been made.” We’re going to see a lot of business-to-business mitigation coming up. Interest rates have been high for the past two years. For ten years in a row, we had interest rates below 5%. Ten years in a row. Then, all of a sudden, they’re floating between six, seven, and seven and a half percent. Whenever rates go up, industry service people, realtors, housing, and housing finance, look for ways to find business to sustain their lifestyle. There has been a lot of political pressure to loosen credit underwriting rules. I wrote a book that covered forty-five countries in the world. It was called International Mortgage Banking that I wrote for the N B of A of America 20 years ago. I can tell you that all these other countries have a very simple system. Very simple.

Noah Bolmer: In general, have you worked as an expert witness in international matters?

Anna DeSimone: No, because my book was published shortly before 9-11 and anything that would have involved some travel- that was before Zoom. Fannie Mae bought five thousand copies, and they shipped the book to all of their participants around the world. At the time, they wanted to teach their mortgage-backed securitization framework to other developing countries. Technically, mortgage-backed security was invented in Germany. It’s called Pfandbrief. What I did notice is that not only does the United States have hundreds and hundreds of laws and regulations, but they’re also not unified across the 50 states. More importantly, the politicians are involved. The attorney generals of each state fight over fair lending laws. They fight over laws for redlining. I feel that I could be doing a lot more work. One thing I do know is there were about twenty-seven cases with the Justice Department on redlining when the Justice Department fined these twenty-seven lenders a cumulative $150 million over a three-year period. When these companies get into trouble they go for the white shoe law firms in Washington, DC, and they think I’m not going to pay $20 million to a federal agency. I want you to prove that we didn’t discriminate. I know exactly what they did wrong. To me, it’s so simple. They’re putting a hundred percent of their mortgage applicants through an underwriting system. That is great for people who have had the same job for ten years, have all their money in one bank, and haven’t moved. That is only twenty percent of the buyers in America. A third of homebuyers are self-employed. A large percentage had gifts and grants and got money from their family, so when they go online to the aggregators, they automatically get denied.

Noah Bolmer: Right.

Anna DeSimone: We had fewer denials when people walked into a brick and mortar, shook hands, and said, “I want to buy a house.” In those days, denials were minimal, so it’s not about race, it’s about believing that you don’t need to have a face-to-face conversation with a customer. Circumventing any possibility that there might be an accusation of discrimination. “We don’t. Every single loan goes through our system. Everybody is free to the same.” This is their defense. “We’re not looking at people and we’re not asking questions, so how could we be accused of discrimination?” That tactic hasn’t worked.

Noah Bolmer: I’d like to move to some general questions. As an expert witness on a new engagement, you are working with an attorney that you haven’t worked with before, what are the qualities that make for a solid expert/attorney relationship? How do you get off on the right foot and how do you stay there? How do you maintain that throughout what potentially could be a long and arduous relationship throughout the course of the action?

Anna DeSimone: Usually, it’s a phone conversation. I find that if someone goes on my LinkedIn profile or they’re looking at my resume, I probably will never hear from them. Because it is just giving the cases I worked on, my job experience, and my school. There’s no way for them to get to a comfort level, and I find that ninety percent of the phone interviews I did, I was called to be an expert. It’s funny because a couple of cases were dropped. I was strongly considered for a huge case that happened to be litigation between two federal agencies. It was huge. And I agreed to look at the confidential disclosure, and I gave my opinion on what I thought would be a good tactic. “This is what I would suggest we do.” Anyway, I didn’t get it, but I did get a very nice thank you. “You were strongly considered.” It was in the news recently that the defendant lost the case. I often wonder, did somebody say, “Why is she mentioning that? That’s not what this is all about.” I can’t give too much away because it’s confidential.

The thing is, I saw something that I thought could potentially help. It’s about business-to-business failures. If a mortgage lender goes under, somebody has to clean up the mess. What I came up with is “Here all these are the clues that somebody would have seen two years earlier that they were distressed.” That this was a potentiality that could happen. And I still believe that. And so again, I think that the mistake is the purpose of the litigation is to prove that someone is complying with the law.

Noah Bolmer: Do you have any other kind of red flags that you look for? You know this isn’t going to go well. I shouldn’t take this case, or this isn’t going in the direction that I want it to.

Anna DeSimone: In the past ten years, I have turned down probably 20 cases because they were outside my area of expertise. There was a slight crossover, but I wasn’t comfortable in saying that I was an expert in that area. They were fine with it. It was not Round Table Group, but it was from some referral company. I don’t think it’s fair to an organization such as Round Table Group to pretend that you can suddenly become an expert in a field that has some similar crossovers. As an example, I consider myself one of the nation’s top experts in residential mortgage. I have written a lot of policy guides on home equity lending. I taught classes on the topic of home equity lending, but I don’t consider myself a home equity loan expert because my office didn’t audit those loans, and every bank has their own rules, so I’d turned a couple of those down. I could brush up on it, but at the time I thought it’s not my strongest area. Being honest with your capabilities and expertise is so important.

Noah Bolmer: Before we wrap up, do you have any other additional advice for expert witnesses or even for attorneys who are hiring experts?

Anna DeSimone: I’ve already alluded to the fact that there’s so much—it’s like you’re seeing the tip of the iceberg when a plaintiff says, “I was mistreated and I’m suing. I’m not paying. I wasn’t treated fairly. They discriminated against me.” The best thing for defense attorneys to do when you say, “What else is going on here?” Keep an open mind that there’s more than the checklist. Is the document in the box?

Noah Bolmer: Sage advice? Ms. DeSimone, thank you for joining me today.

Anna DeSimone: Thank you.

Noah Bolmer: Absolutely and thank you as always to our listeners for joining me for another edition of Engaging Experts. Cheers.

Anna DeSimone, Owner of Housing Research, LLC

Anna DeSimone, is the owner of Housing Research, LLC, where she’s a consultant specializing in residential mortgage lending. She’s an award-winning author and an expert in mortgage fraud, predatory lending, compliance, and loan serving.