We now know that many of the “foreclosure experts” who were signing many thousands (perhaps millions) of affidavits that allowed banks to kick delinquent homeowners out of their homes were utterly unqualified to understand the sorts of technical information they were spewing while under oath. In short, the banks were allowing and requiring incompetent employees to lie under oath in order to allow foreclosures to go forward:
In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says. In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.
Even under the assumption that many or most of these homeowners were actually delinquent, this is incredibly disturbing. Richard H. Neiman, New York’s top bank regulator and a member of the Congressional Oversight Panel, a federal bailout watchdog, has expressed concern:
“In recent days, it has become apparent that a number of mortgage loan servicers have submitted affidavits or other foreclosure documents that appear to have procedural defects,” the Conference of State Bank Supervisors said in a statement. “In addition, many affidavits may have been signed without a notary public being present.
NPR has provided a more detailed description about the kind of people who served as “robo-signers”:
ARNOLD: [T]his GMAC employee told him that even though he was supposed to be certifying the accuracy of the documents in a homeowner’s file…
Mr. COX: He said he that doesn’t look at them. He doesn’t bother to go search them out in the computer to look at them.
ARNOLD: And Cox said the sheer volume of foreclosures appeared to make doing a thorough job impossible. Stefan testified he’s signing between eight and 10,000 documents a month.
Mr. COX: That works out to be about one a minute. Some of those loan files contain a hundred or more documents.
ARNOLD: Housing advocates call employees like this robo-signers. They say they barely have a chance to glance at all the documents that they’re asked to sign.
These fraudulent foreclosure cases are hitting the courts all over. And they should, because many of these homeowners were lied to on the way in (about “yield spread premiums” and exploding ARM’s and hidden penalties), and now they (and the courts) are being lied to on the way out. In fact, based on my personal experience as a consumer lawyer, the lies on the way in, and the shodding servicing, led to the foreclosure.
Here’s a synopsis of a lawsuit filed Oct 1, 2010 by Center for Responsible Lending:
Five Maine residents filed a complaint today against GMAC Mortgage, LLC (GMAC) on behalf of themselves and a class of Maine homeowners, alleging that the company routinely and systematically files false certifications that it has a right to foreclose on Maine homeowners, and false affidavits when asking courts to enter foreclosure judgments.
The homeowners complain that GMAC files these false documents knowing that the courts in Maine will rely on them in deciding whether foreclosures can go forward and in allowing GMAC to sell their homes. Depositions of GMAC employees revealed that they do not verify the truth of information necessary to give GMAC the right to foreclose when they sign these court documents and that these improper practices have been in place since at least 2004.
This situation is horrendous. It justifies impolite synonyms for banks: house-jackers. Banksters. If you cringe at this language and consider it overbroad, ask yourself whether “innocent” bankers knew of this problem and whether they often discussed it at the country club with the evil bankers. And they didn’t step up and report it. Consider also that the banks so often preach the importance of the “letter of the law” when slapping huge fees and penalties on home-owners, even when the homeowners are only a day late with their payments. Now here are those same banks, absolutely unable to establish a chain of title necessary for a foreclosure, but they utterly don’t give a rat’s ass about the letter of the law, because this archaic rule (letter of the law) is now a burden to the banks.
From the perspective of the banks, the solution to the problem that they can’t figure out how to establish their case in the context of the convoluted system that they themselves created, is to systematically lie under oath. Over and over and over. And now that the banks have been caught by the national media, and because the media is paying attention, the politicians also need to pay attention to this problem, and everything has become awkward for the banks. Very Inconvenient. They might have to pay big money to send thousands of lobbyists to Congress to fix this problem. And then they will have to jack up their rates and penalties and other tricks and traps to pay for those lobbyists.
[Isn’t this a lesson in itself? The lesson being that when the media does its job, politicians need to do more than pretend to do their jobs?]
But it’s more than banks that are reprehensible. It’s their lawyers too:
But the people who deserve the greatest scorn for their behavior in the foreclosure document scandal are the robo-signing lawyers and their colleagues who submitted robo-signed documents to the courts. These attorneys should be facing discipline and perhaps disbarment for their actions. After all, when we talk of homeowners and robo-signers at banks, we speak of people who should have known better — and that’s the lawyers’ job.
The “explanation seems to be that these “robo-signers” (who are actually human beings who were willing to deaden their consciences in return for a meager paycheck), were paid by reprehensible attorneys, whose actions were well-understood by banks that were intentionally committing fraud on the courts and on the home-owners:
Was this lying under oath improper? The victims say yes and the banks claim that the banks themselves are the victims.
The firms’ responses seem to fall into two camps: we’re fixing the problems now or there was nothing wrong to begin with. For instance, in a statement, Gerald Richman, an attorney for one of the firms, Shapiro & Fishman, said, “This is a sad example of the Attorney General’s office’s continual fishing expedition that wastes taxpayers’ money. Nevertheless, we still maintain our willingness as we have from the beginning of the improper investigation to voluntarily cooperate with the AG’s office.”
Does the bank claim of victimhood make you want to laugh? Vomit? Throw hundreds of high paid executives in prison? Yes, yes and yes.
The bank executives will claim that they were actually following the law, more or less, when they circumvented the need to establish a chain of title (a critical part of their case in court. Without this step, the banks can’t show that they were entitled to kick the owners out of the homes they were foreclosing. But wait a minute? Isn’t it a matter of basic property law that the foreclosing bank be able to establish that it is entitled to bring the suits that kick owners out of their homes? Sure it is. Ask any first year law student. How is it, then, that the banks are having such trouble establishing that they are entitled to kick people out of their homes? Well, you’ll probably find what Robert Sheer is about to tell you to be breathtaking:
How do you foreclose on a home when you can’t figure out who owns it because the original mortgage is part of a derivatives package that has been sliced and diced so many ways that its legal ownership is often unrecognizable? You cannot get much help from those who signed off on the process because they turn out to be robot-signers acting on automatic pilot. Fully 65 million homes in question are tied to a computerized program, the national Mortgage Electronic Registration Systems (MERS), that is often identified in foreclosure proceedings as the owner of record.
MERS was the result of a partnership formed back during the Clinton years between Fannie Mae, an ostensibly government-sponsored agency that morphed into a very much for-profit mega-Wall Street hustler, and Countrywide, the largest and most rapacious of the private mortgage marketers. The scam of computerized credit approval and mortgage certification they came up with was subsequently embraced by Freddie Mac, the other huge housing agency, and the leading Wall Street banks joined in the feeding frenzy. MERS owners now include Wells Fargo, AIG, GMAC, Citigroup, HSBC, the two housing agencies and Bank of America. But the courts are increasingly challenging MERS claims to the right of foreclosure since this whole racket, which bypasses the power of counties to register property ownership, was never authorized in the law.
Yet the White House on Tuesday once again manifested an indifference to the suffering of victimized homeowners when press secretary Robert Gibbs warned of the “unintended consequences to a broader moratorium.” Which presumably would be worse in his view than the intended consequence of evicting people from their homes, which has already affected some 20 million Americans and threatens many more. What arrogance for an administration featuring Timothy Geithner and Lawrence Summers, who created this mess back in the Clinton era, to evidence such slight compassion for the victims of their folly.
The disastrous disarray in the housing industry is a direct result of decisions taken during the deregulation frenzy of the Clinton presidency when the securitization of mortgage and other debts was removed from any regulatory supervision. Instead of mortgages being between customers and banks and then being properly recorded by local government agencies, they became poker chips in the Wall Street casino. Tens of millions of home mortgages were recklessly issued with scant reference to their true values and bundled into securities to be sold on the unregulated derivatives market. But in order for there to be sufficient fluidity in the rapid-fire swapping of stock bundles of individual homes, those mortgages had to be unhinged from the valid legal restraints that had governed their issuance throughout most of human history.
Therefore, this “robo-signer” issue is only the tip of the iceberg. This current foreclosure crisis:
is much deeper than the specific issue of robo-signers which has precipitated the halt in foreclosures by major banks. The fact is the mortgage process in the US is broken because securitization has created a byzantine mess that is wholly unsuited for the large number of foreclosures now on-going.
This post has gone on for awhile, and I do need to bring it to a close. And yes, I do recall the title of this post. “An outrageous prediction regarding illegal foreclosures by banks.” Therefore, I’m going to make a prediction, and it will be outrageous. Here it is:
The banks will get away with what they have done, even though they have committed fraud, even though they are circumventing basic rules of evidence and even though their attorneys are flagrantly violating rules of attorney ethics. They will get away with it just like the loan originators (of many of these same loans) got away with lying, cheating and stealing when they sold these loans, many of which were reprehensible subprime flips.
But Congress will come to the rescue because, as Dick Durbin once said, “The banks own the place.” He was referring to Congress, of course. This little problem of rampant lying under oath will be swept under the rug. There will be an investigation and there will be a LOT of scolding by members of Congress who will want to pretend that their deregulation of banks has nothing to do with this disaster. In the end, though, almost no one will go to prison, because the highest ranking perpetrators are mostly well-connected wealthy guys who went to the right schools and who now belong to the right country clubs. Maybe a few of those low-paid robo-signers will go to prison, but not their bosses. Well, maybe one or two of the bosses will go to prison because the authorities will want to make it look like they are getting tough.
And I suppose that the banks won’t completely get away with their lying, cheating and stealing (No, I’m not referring to the ways they sold these loans or the ways they fraudulently serviced these loans—I’m referring to these fraudulent foreclosures). They won’t completely get away with this because too many people are watching. They will be penalized, but we’ll see a tiny symbolic penalty that is not really a penalty at all. Maybe it will be this: Congress will impose on the banks a 60-day moratorium until the new law kicks in, and this new law will say something like this: It was OK for the banks to commit fraud on the courts, and that it was OK that the banks failed to establish proper chain of title. And it’s OK for MERS to continue existing as a secret privatized conniving “recorder of deeds” that violates ancient revered principles of property law. And it’s OK that everyone who has been already kicked out of their houses based was victimized by false affidavits. And there will be a presumption that a bad chain of title is actually a good chain of title. And the victimized consumers will get a token remedy–maybe it will be something like a coupon for a Happy Meal at McDonald’s. It won’t be a real penalty because Congress and Tim Geithner will urge us that we don’t want to hurt the banks because that would be like hurting ourselves. We need to avoid trickle-down pain, you see.
A tiny penalty is the only thing Congress will allow, because the only alternative would be to really clean up this mess and make it understandable, punishing those who made the system needlessly complex. And keep in mind that this complexity was always part of the plan. This system didn’t just happen to get complex—it was carefully planned to be incomprehensible. Without this complexity (including the creation of MERS, the securitization of home loans and the complex Wall Street financial instruments that make the buying and selling of these loans even MORE complex), this scam designed to shrink the middle class couldn’t have gotten off the ground.
I’ll end with a widely applicable proposition uttered by particle physicist Heinz Pagels.
One can make money only if there is real risk based on actual uncertainty, and without uncertainty there is no risk.
Epilogue: How is it that bankers ever got the reputation they have?
About the Author (Author Profile)Erich Vieth is an attorney focusing on consumer law litigation and appellate practice. He is also a working musician and a writer, having founded Dangerous Intersection in 2006. Erich and his wife, Anne Jay, live in the Shaw Neighborhood of St. Louis, Missouri, where they are raising their two extraordinary daughters.
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