“One nation, under fraud
In 2007, Deutsche Bank sued [Patrick] Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.
The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.
In June of this year, a Florida court ruled that the document was fraudulent, as the person who was supposed to make sure Jeffs was served had mysteriously received a copy of the summons before the lawsuit had even been filed, and Jeffs never even saw the copy. The text of that ruling was posted on various financial news websites in September. The lawyers that Jeffs hired to defend his case say that fraud such as this is not uncommon. It’s a widespread problem, and it has cost countless families their homes.
“I think it’s safe to say that 95% of the foreclosure cases in Florida involve some form of fraud on the part of the bank,” David Goldman of Apple Law Firm, PLLC told The Daily Caller in a phone interview. “It’s probably closer to 99%. And the court system is helping them get away with it.”
...The Sunshine State has something called the “Sunshine Law,” which states that unless very specific conditions, such as the need to protect a witness, are met by a trial, it must be open to the public. But over the past several months, Goldman says that attempts to observe foreclosure proceedings have been met with bailiffs and locked doors. Then, banks successfully argue that because they own the paperwork behind mortgages and don’t want anyone who doesn’t have to see those titles to see them, the public doesn’t have the right to ask for them as part of an examination of court records.
...Chase had tried to work out a loan modification with Jeffs, and he was current on his payments when Chase abruptly informed him that his modification was denied without explanation. Several days later, Jeffs found out that he supposedly no longer owned his home. He stopped making payments, and he hasn’t made them since. But no bank has been able to successfully repossess and sell the property. To the banking system, the asset backed by the house—the mortgage—has simply vanished into thin air.
Does that mean that Jeffs is finally in the clear? Not exactly. “Quite often, what happens in these cases is the bank creates new documents to fix the old documents,” said Goldman. “One of the most common things we see is a paper with a notary stamp that gives the bank the legal authority to foreclose. Well, anyone can buy those stamps. I can buy those stamps. A lot of what’s going on is law firms desperate to win a case are hired by banks who don’t know what those law firms are up to. Then the bank thinks it can foreclose, even though other banks also think they have that right, and those banks might not figure out what happened for a long time because the system is absolutely overloaded with foreclosures...”
...Unfortunately, the problem isn’t limited to Florida. California’s attorney general recently filed his own class-action lawsuit on behalf of all of his state’s homeowners regarding the use of fraudulent documents to foreclose. Ohio’s attorney general has announced that he will be prosecuting every single case of foreclosure fraud committed by Ally Bank, formerly known as GMAC, with an individual lawsuit. Each suit would carry with it a fine of up to $25,000 on top of the cost of repairing the damages caused by the erroneous foreclosure. Arizona’s attorney general has sent letters to more than 60 banks informing them that foreclosing on any homeowners with erroneous documents will be considered criminal fraud.
Things are particularly bad in states like Arizona because of a peculiarity of their respective state foreclosure laws. Banks don’t have to go to court to foreclose on a property in those states. Instead, they can simply show “proof” of rightful foreclosure to local officials, who then evict the homeowners. To fight back against fraud, the homeowners have to hire a lawyer—which many can’t afford to do—and win a lawsuit before the property is sold.
...As business reporter Al Lewis wrote at the time, “You can’t expect a bank that is dumb enough to sue itself to know why it is suing itself.” So goes the unprecedented wave of foreclosures that has swept across the country since the housing bubble popped. Mortgages have been bought, sold, and repackaged so many times through such an opaque process that banks have no idea who owns what. When they foreclose, they simply guess, making up the documents and information necessary to do so.
A man named Jeffrey Stephans testified on September 14th that he had signed off on affidavits which he didn’t actually examine.
...Tammie Lou Kapusta, a former paralegal for one of those mills, testified on September 22nd that she was instructed by the attorneys at the firm to officially notarize hundreds of documents a day with a notary stamp that she wasn’t legally allowed to use. When complaints started rolling in about stamp dates that didn’t match other dates within the documents, she and all of the other paralegals doing the same thing at the firm were instructed to make the date of the stamp match the other dates, no matter what day it actually was. The documents would then be signed with the name “Cheryl Samons” by three different people, only one of whom was actually named Cheryl Samons. Kapusta said she drew the line when she was instructed to use random Social Security numbers assigned to people who might not even exist in order to falsify documents regarding each hypothetical person’s military status.
...there are now countless fraudulent papers containing military-related claims which are making their way through the system, and the actual people attached to the Social Security numbers used have absolutely no idea they’re tied to legal documents that they’ve never laid their eyes upon.
...The first thing that’s insidious about the banking reaction to all of this is the timing. A Bank of America executive told a Massachusetts court in February that the practice of not examining mortgages intended for foreclosure is common.
...What’s most insidious is where the foreclosure freezes are taking place. Many banks have only ordered foreclosures to cease in 23 states. Why 23? Because there are 23 states that require courts to review foreclosures. And every single one of those states is on the list.
The banks in question have been trying to claim that they only chose to stop most foreclosure activity in the 23 judicial review states because they think the problem is almost entirely contained within the robo-signing of the court documents needed to foreclose.
...North Carolina isn’t a judicial review state.
To be more specific, a mortgage has two basic components. One is the deed of trust attached to the property itself, and the other, called a note, is the homeowner’s IOU. ...The notes were the things getting robo-signed during the housing bubble, not by foreclosure mills but by mortgage mills. And the signing was even more robotic because it could be done electronically through a system called Mortgage Electronic Registration Systems (MERS). When a note was sold into the system, “ownership” of the note could be traded via computer. Unfortunately for MERS, the law requires the physical note to prove ownership, so none of these trades were exactly what one might call legal, or even what one might call real. Hence the need for operations...to fill in the missing paperwork.
...the company that runs the system, MERSCORP, does not actually have any employees, and that it licenses employees of other companies to use the title “Vice President of MERSCORP” in foreclosure lawsuits. It also sells its own corporate seals, used on paperwork to back up foreclosures, for $25 online.
...recently-released court depositions state that financial institutions hired hair stylists and Walmart floor workers to fill positions that would qualify for the term “foreclosure experts,” even though the so-called “experts” received barely any training at all. These were the robo-signers, and many of them couldn’t even answer questions as to what a mortgage is, or what an affidavit is. Some of those people have now testified that they knew they were lying when they signed foreclosure affidavits (the ones they couldn’t define), and that they agreed with the accusations of document fraud. As they signed, they both used information from and created new information for MERS.
A class-action lawsuit was just filed in California which asserts that MERS has no legal standing whatsoever in nearly any state to actually hold a mortgage. Many mortgage-backed security experts are not even aware that MERS has made the shaky legal argument that it’s both the actual owner of any given mortgage and also merely the entity holding onto any given mortgage for someone else. The same lawsuit states that Countrywide, which took over a larger and larger part of all mortgage lending in the state during the housing bubble, not only committed fraud by selling faulty mortgages to investors from 2004 onward, but knew that it was doing so. That means a lot of the original paperwork behind those mortgages will have to be changed, which poses a problem not just for Countrywide, but for nearly every lender in the United States.
For financial institutions, the problem isn’t the “missing” documents. It’s the missing documents—the real ones, which say much different things than the “missing” ones, and which the banks can’t seem to get their hands on. ...There’s good reason for that—the industry destroyed the papers a long time ago. On purpose.
Banking officials happily told the Florida court system in 2009 that the documents had been shredded. At the time, lenders were trying to prevent some foreclosure rule changes, so they sent a letter to the Florida Supreme Court. Among other things, the letter stated that it was standard practice to destroy mortgage papers once the mortgages were sold into MERS in order to avoid confusion...
...there are companies which provide banks with the convenient ability to purchase “recovered documents” to replace papers that are “missing.” Until 2009, a company called DOCX was one of these providers...
The fact that so many contracts were torn up explains why DOCX didn’t deal in affidavits of foreclosure, at least not according to a DOCX price sheet posted on attorney Matthew Weidner’s website. The sheet lists the going rates for tasks such as, “cure defective mortgage.” Nowhere on the document does DOCX say that its services were limited to 23 states. Quite the opposite, in fact—DOCX proudly boasts of its “nationwide” presence at the very top of the sheet. Any mortgage that became “defective,” something that tends to occur when banks can’t find anything signed by homeowners with “mortgage” written in nice big letters somewhere, could be “cured” by DOCX, no matter what state contained the relevant property.
DOCX also offered to “create missing intervening assignment,” which refers to something called an “assignment of mortgage,” the document used to sell a mortgage from one financial institution to another. The company would completely make up the document showing who owned any given mortgage, and would do so for the low, low price of $35. DOCX saved its best for last: “Recreate entire collateral file.” A collateral file is made up of several documents, including the note, deed, title commitment, and assignment. ...And anyone willing to buy a whole lot of fresh papers even received a “volume discount” for their bulk orders.
...The attorneys general of every single state just opened a joint investigation into foreclosure fraud. As long as 50 is still a bigger number than 23, the problems aren’t contained.
...The Association of Financial Guaranty Insurers recently told Bank of America to prepare to be hit by lawsuits which will force it to buy back between $10 and $20 billion worth of mortgages. Similar numbers would apply to other nationwide banks. Bank of America’s entire federal bailout, before it purchased Merrill Lynch and needed additional funding, was worth $25 billion.
MERS, incidentally, also developed a commercial real estate program. ...Right now, the fraud investigations are mostly contained within residential real estate. Just like the problems in subprime lending were “contained” within subprime housing, according to Ben Bernanke in 2007. The owners of stores and offices around the country will soon be investigating the documents used to foreclose on commercial property much more closely.
The federal government recently tried to “fix” the mortgage mess with HR3808, a bill which would have required every state to recognize electronic records—the ones being robo-signed. Word of this legislation spread around the Internet quickly enough that an enormous amount of pressure was put on President Obama to veto it, which he ultimately did. The problem was that he had to. HR3808 was only on his desk because it had passed through the House with a simple voice vote and through the Senate by unanimous consent. Every single Democrat and every single Republican present in the Senate at the time approved of the bill. Which experts in blind rubber-stamping could possibly have been advising senators and representatives to let this legislation sail through Congress?
...when confronted with this information, the CEO of a major subprime lender replied, “If you’re right, we’re [screwed]. We never transferred the paper. No one in the industry transferred the paper.”...
...what they’re doing is illegal. Fraudulent. Wrong. A forgery wrapped in a deception wrapped in a lie.
...When questioned as to why [Deutsche’] foreclosure proceedings are continuing despite the fact that its lawyers had been proven to be committing fraud, and why those proceedings are continuing despite the fact that the loan servicers which are a part of every major bank’s legal stature have been called into question, Deutsche offered no answer whatsoever. Its official response...was that it “declined to comment.”...
Deutsche’s refusal to explain its actions is even more important than most would think because mortgages themselves aren’t the end of the story. When banks bought bunches of mortgages to create now-infamous mortgage-backed securities, they did so by forming trust companies to hold the mortgages themselves and forward money to the investors who bought the securities. One of those companies is technically who sued Patrick Jeffs—not Deutsche Bank, but the Deutsche Bank National Trust Company. When the companies were created, they had to abide by what’s called a pooling and servicing agreement, which defined the steps they had to take to acquire mortgages and send mortgage payments to the correct investors.
The agreements allow the companies to enjoy tax-free status with the IRS, because the payments they receive aren’t considered income due to the fact that the role of the trusts is to send virtually all of the money to someone else.
The IRS has strict rules regarding these companies, and when the rules are broken, there’s a slight penalty. From 0%, the tax rate on payments received by a trust company that broke the rules jumps to 100%. One of the rules states that a trustee is supposed to acquire any mortgages it will hold within three months of the formation of the trust.
...the notes and assignments involved have either been destroyed or are so erroneously marked that they’re fraudulent."
Joseph Tauke
The Daily Caller
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