Mortgage servicers still lying in court

By Felix Salmon
September 1, 2011
Kate Berry has a fantastic piece of reporting today, under the headline "Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents".

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American Banker’s Kate Berry has a fantastic piece of reporting today, under the headline “Robo-Signing Redux: Servicers Still Fabricating Foreclosure Documents”. Among her discoveries is this document, dated August 3, 2011, wherein Tonya Hopkins signed over a mortgage in her capacity as Assistant Secretary of Sand Canyon Corporation. The problem with this? Sand Canyon hasn’t been in the mortgage business since 2009, and Tonya Hopkins doesn’t work for Sand Canyon: she works for American Home Mortgage Servicing Inc.

This, naturally, causes problems.

North Carolina consumer bankruptcy lawyer O. Max Gardner III says servicers and trustees often submit promissory notes in court without proper endorsements, which show the chain of title from one lender to another. Then, after the fact, there will be “a magically appearing note with a stamped endorsement,” Gardner said.

When plaintiff’s lawyers then try to depose the person whose name is stamped on the endorsement, “we’re being told the person is no longer employed by the servicer or by the party for whom they signed,” Gardner says.

There’s a case to be made that banks need to be able to reconstruct chains of title long after the events took place, because paperwork just wasn’t done properly during the subprime bubble. But even if you buy that argument, they should do so honestly and transparently. Their gut instinct, all too often, even today, is to simply fudge or forge the paperwork they need. And the fact that they’re still doing this, even as they’re supposedly in good-faith negotiations with state attorneys general on a big mortgage settlement, is a very good reason to believe that no such settlement will actually be effective. What we need isn’t a settlement; it’s enforcement. And there’s no sign we’re going to get it.


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What we need isn’t a settlement; “it’s enforcement. And there’s no sign we’re going to get it.”

There are signs… but they all fizzle… like the AGs and their promise of jail time. Like the investigations that fizzled. It’s been a whitewash, so this will be as well. Goldman has been ordered to do an independent audit as to why it wasn’t complying with previous orders of compliance, so they couldn’t just sell the hot potato and wash their hands of it. (They will get a hand slap first!) hes-new-formal-enforcement-action-agains t-goldman-sachs-to-review-foreclosure-pr actices-2011-9

“Goldman Sachs has acknowledged in today’s action that it will be responsible for satisfying any civil money penalty that the Board of Governors could have assessed against Litton for its conduct.”

They must have had the monies set aside for some time now, as the other banks have, being the fines are a spit compared to what they made turning people out of their homes and their short positioning and reselling. Fines are a start, but why aren’t people going to jail for fraud and forgery?

Forging can be 3 to 10 years by state law. Those who enable the forging, use computers or other equipment to forge the document/securities etc are also liable. There are 45 pertinent statutes for which a small time hood and his accomplices can be criminally charged.

So if the least money involved means a 3 to 5 year sentence, why are the courts allowing this robo stamping of forged documents and signatures? The courts are actively colluding in a crime if they are not requiring legal documentation and few are. (hell, the judges have their own rubber stamps)

For the homeowner, the mortgage is a legal and binding document, but for the banks, the chain of title, documents and signatures are a pesky nuisance …

The mortgage/MERS/foreclosuregate mess is being covered over like a garbage dump … but it is still a huge pile of crap that isn’t going away and stinks to high heaven. Look for no consumer confidence, a stagnant housing market and clouded titles. Also look for many more civil suits from investors, being fraudulent concealment tolls the statute of limitations. Have a fun decade! Your children will appreciate the legacy of that garbage dump that will still need to be cleaned up.

Posted by hsvkitty | Report as abusive

All parties still in business have to be willing to back up their position in a fair court or eat the consequences. That’s fair to everybody. Like it or not ..

Posted by Woltmann | Report as abusive

The problem is that actually enforcement is very time-consuming and difficult, mainly due to the fact that offenders (in this case banks) have access to greater legeal resources than the government does. Often, by the time cases such as these are actually prosecuted, the offenders are long gone and do not get punished. Therefore the government tends to settle for monetary penalities without an admission of liability.

Posted by mfw13 | Report as abusive

“There’s a case to be made that banks need to be able to reconstruct chains of title long after the events took place, because paperwork just wasn’t done properly during the subprime bubble. But even if you buy that argument, they should do so honestly and transparently. ”

No, there’s no case to be made. There’s no way to basically forge documents honestly. They willfully violated the law and their own contracts. Why should recognize their claim as legitimate? They screwed over the homeowners, their investors, the county land recorders. Properly fixing broken chain of title is costly and time-consuming. Who will pay for that?

Posted by Moopheus | Report as abusive

Another example of bar associations failing as well. The attorneys are party to fraud, at the least by turning a blind eye and likely more directly. Enforce bar sanction and attorneys with any reputation at all will refuse to participate in this kind of thing.

Another lever is pretty simple: adoption of a rule in courts where foreclosures occur often – which can be done in most cases administratively by the judges themselves – which requires personal testimony by endorsers or, at minimum, an affirmation by the attorney. The point of the latter is to put the attorney’s license on the line: affirm a lie, you get suspended, even disbarred.

Attacking banks is not a strategy to get much compliance. The levers are the lawyers.

Posted by jomiku | Report as abusive

jomiku, although you have a point, the lever would be good lawyers… as in good at their jobs and ethical.

But you see, the law firms are the ones ensuring the docs are robo signed… and the judges are saying they do not have time to ensure that the rule of law is followed. (a few ethical judges are refusing to participate, but very few)

Attorneys knew their Licenses were on the Line! They were/are committing fraud and knew it.

Do you really think David J Stern, involved in 70,000 foreclosures in Florida, bringing in $260 million in revenue, gives a whit about being suspended or disbarred? And Stern was just one of 4 Florida firms doing this kind of robo signing and fake documents.

He hasn’t been disbarred nor was he jailed that I have read. No investigation were followed through. Maybe it’s because mortgage giants Fannie Mae and Freddie Mac, were some of it’s biggest clients until 2010, when they stopped using the firm and pulled any pending foreclosure cases. Maybe one of the those conveniently removed from the system and the documents destroyed by the SEC? Hey this isn’t called foreclosuregate for nothing… ss/02stern.html?_r=1&pagewanted=all

Everyone is supposed to be happy that Goldman is told to stop robo signing on the day they sell their hot potato servicer. That hand slap outta stop them from engaging in bad things ever again!

The 50 states AGs should be removed from their positions as ineffectual for not bringing justice back to the system. Until they do, there will never be consumer confidence and always be criminals flourishing and banksters profiting from fraud. Property law is a misnomer…

The Law profession should be defending the RULE OF LAW, but there isn’t enough money it it for them …

Posted by hsvkitty | Report as abusive

Yves Smith begs to differ: “It’s disturbing at this juncture that Felix Salmon more or less falls in with the bogus bank party line on “memorializing” (he finesses it by saying they need to do it “transparently”). I suggest he try talking to an attorney who is expert in securitizations and does not have opinion letter liability on this matter. The contracts that governed these deals were immutable and set forth in precise detail the steps various parties to the deal were required to perform. That included strict cutoff dates for getting the properly prepared notes and mortgages to the securitization trusts. Long-standing precedents for New York trusts (virtually all RMBS trusts are New York trust) call for delivery to the trust to be as perfect as possible. Since all securitization through at least the late 1990s did deliver all the notes and mortgages to the trusts as stipulated, there is no excuse for later changes in practice (as in if the parties wanted to simplify procedures for reasons of cost or convenience, they needed to change the governing agreements to reflect that).”

She does go on: he-more-you-look-the-more-bank-criminali ty-you-find-in-mortgage-land.html?utm_so urce=feedburner&utm_medium=email&utm_cam paign=Feed%3A+NakedCapitalism+%28naked+c apitalism%29

Posted by walt9316 | Report as abusive

“There’s a case to be made that banks need to be able to reconstruct chains of title long after the events took place, because paperwork just wasn’t done properly during the subprime bubble”

i dont know. a lot of the 100,000+ immigrants who have been deported by Obama also didn’t have the proper paperwork – hey, it just didn’t get done properly during the immigration bubble.

so.. maybe you could call these ‘undocumented mortgages’. or, if you are a blow hard radio commentator, you could call them ‘illegal mortgages’, and scream up and down about how the lenders broke the law, and need to be punished in the harshest of fashions, put in prison, separated from their families, with all their posessions sezied from them. i mean, thats what you should do with lawbreakers right?

Posted by decora | Report as abusive

As unfair as it seems to so many that banks are bending and breaking the law the very simple fact is that MATH has dictated the end result from the beginning and will cut effortlessly through any law on the books like a hot knife through butter.

If we attempt hold banks to the standard that if every i is not dotted and every t crossed and the letter of the law followed to the letter than the forclosure is off and the non-paying squatters keep the collatteral… where does that leave us…

…it leaves us with several million people who did not pay for houses in houses… no harm other than a little moral hazard I guess…

…and oh ya the void left when 50% of the entire financial sector is insolvant. As great as that sounds for small community banks like mine, math just keeps getting in the way… it will take a decade for mid-sized banks to scale up their operations enough to pick up the customers that the 5 giants currently serve.

Cheering the demise of bad acting banks and back office paper pushers trying to make the best of their low paid thankless, futureless, jobs is a road to nowhere but a 2nd depression. Kudos to Felix for realizing this when most others don’t.

Posted by y2kurtus | Report as abusive

y2kurtus, it will dramatically increase the cost of mortgages as well as you have to factor in the cost of transporting the original notes in armoured cars.

The obvious solution needed is some sort of electronic registry a la MERS.

Posted by Danny_Black | Report as abusive

By the way, isn’t the legal entity still in existence? and it seems the mortgage is being assigned away from the trust and the document in question is not a assignment but rather an affadavit that the assignment happened.

As usual, lazy incompetent “journalists” are just regurgitating what lawyers talking their book has said without even bothering to do even the most basic fact checking.

Posted by Danny_Black | Report as abusive