The financial crisis has spawned hundreds of criminal prosecutions for alleged fraud. Yet so far, defendants have been mostly minor players such as real-estate agents, mortgage brokers, borrowers and a few low-level bank employees. No senior executives at large financial institutions face criminal charges.
Thats in stark contrast to prosecutions during the savings and loan scandal two decades ago, when the government’s strategy targeted and snagged some of banking’s most powerful players. The approach back then succeeded in sending scores of S&L executives to prison, as well as junk-bond king Michael Milken and business tycoon Charles Keating Jr.
One explanation for the difference may be that key bank regulators — who did the detective work during the S&L crisis and sent more than 1,000 criminal referrals to prosecutors — have this time left reporting fraud up to the banks themselves.
Spokesmen for two chief regulators, the Comptroller of the Currency and the Office of Thrift Supervision, say that they have not sent prosecutors a single case for criminal prosecution.
An OTS spokesman said the agency, much like the banks themselves, does not see much evidence of criminal fraud inside the financial institutions. The spokesman, Bill Ruberry, citing the agency’s enforcement director, said, “There may be some isolated cases, but certainly there’s no widespread patterns.”
That surprises William K. Black, a former OTS official who helped coordinate criminal investigations during the S&L crisis.
“Dear God,” Black said when told bank regulators haven’t made any criminal referrals. “Not a single one?”
Black sees many signs the the government is less aggressive than during the S&L era — and could result in more bad behavior.
“This crisis was not bad luck,” he said. “It was done to us. When you bring those convictions, you hope that at least for a while to deter.”
Banks have reported massive amounts of fraud to the Treasury Department but have not held themselves — or their top executives — responsible, instead pinning blame on borrowers, independent mortgage brokers, and others.
That may account for the dearth of prosections against big fry. For instance, in California, among states where the mortgage meltdown hit hardest, the Huffington Post Investigative Fund identified 170 mortgage fraud prosecutions in federal courts. Only two are against employees of a regulated lender.
An Investigative Fund analysis shows that two-thirds of the 170 prosecutions are against mortgage brokers, real-estate professionals or borrowers — the same groups blamed by the banks when they report suspicious activities to regulators.
Besides the absence of criminal referrals, other plausible factors for the lack of major prosecutions may include a skittishness among prosecutors about filing cases they could have trouble winning, and a severe decline in investigative resources. The FBI dramatically shifted resources away from white-collar crime after the 2001 terrorist attacks.
To be sure, there are also notable differences between the S&L and current financial crisis, in the behavior of lenders during both periods, and between civil allegations of fraud and proving that someone committed a crime — all of which could account for the lack of big prosecutions.
But interviews with several law enforcement authorities suggest another explanation: A lack of active assistance to prosecutors by bank regulators who played key roles during the S&L crackdown. Those regulators sent detailed reports to prosecutors of known and suspicious criminal activity.
“Only the regulators can make a lot of these cases,” Black said. “The FBI can make a few, but the regulators are the ones that understand the industry.”
Under intense political pressure in the late 1980s, the Justice Department and thrift regulators developed a strategy to thoroughly investigate failed S&Ls for evidence of fraud and to focus their resources on the highest ranking executives.
In the early years, between 1987 and 1989, there were more than 300 prosecutions. Some bank executives were already behind bars. In 1989, Woody Lemons, chairman of Vernon Savings and Loan in Texas, was sentenced to 30 years.
In June 1990, then-OTS director Timothy Ryan told Congress that his agency had established criminal-referral units in each of 12 district offices. In addition, more than 30 OTS employees were assigned as full-time agents of grand juries or assistant US attorneys to help prosecutions. And the agency prioritized prosecutions to a Top 100 list, targeting senior S&L executives and directors.
While data on criminal referrals during the S&L crisis is spotty, the Government Accountability Office reported that in the first ten months of 1992 alone — a random snapshot — financial regulators sent the Justice Department more than 1,000 cases for criminal prosecution.
One study showed that 35 percent of criminal referrals in Texas — ground zero for the S&L problems — were against officers and directors.
This time, prosecutors are relying more heavily on banks to report suspicious activity to the Treasury Department. Banks are required to report known or suspected criminal violations, including fraud, on Suspicious Activity Reports designed for the purpose. In effect, the reports, which can be many pages in length, provide substantive leads for criminal investigations.
Black scoffs at the strategy of leaving it to banks to ferret out all the fraud. “Institutions will not make criminal referrals against the people who control the institutions,” said Black.
A white-collar criminologist and law professor at the University of Missouri-Kansas City, he argues that there’s ample evidence of fraud. Insiders working for lenders openly referred to loans they made without proof of income as “liar loans.” Many banks actively sought inflated appraisals in their rush to make as many loans as possible. As previously reported by the Investigative Fund, such lending practices contributed to the demise of Washington Mutual.
Not everyone agrees that such a case can be successful. Benjamin Wagner, a U.S. Attorney who is actively prosecuting mortgage fraud cases in Sacramento, Calif., points out that banks lose money when a loan turns out to be fraudulent. An investor in loans who documents fraud can force a bank to buy the loan back. But convincing a jury that executives intended to make fraudulent loans, and thus should be held criminally responsible, may be too difficult of a hurdle for prosecutors.
“It doesn’t make any sense to me that they would be deliberately defrauding themselves,” Wagner said.
So far, only sporadic news reports suggest that the Justice Department has ongoing criminal investigations against major banks such as Washington Mutual and Countrywide, as well as investment bank Goldman Sachs.
Fewer Cops on the Beat
The Justice Department, in response to written questions from the Investigative Fund, acknowledged the absence of criminal referrals from financial regulators. Months into the financial crisis, a new Financial Fraud Enforcement Task Force, formed by President Obama last fall, was trying to work out communication problems between Justice and the regulatory agencies, according to the head of the task force, Robb Adkins. Adkins has said that criminal referrals from regulators have been “too often the exception to the rule.”
At a Congressional hearing in December, Assistant Attorney General Lanny Breuer was asked why there have been no criminal cases brought yet against CEOs. “Don’t for a moment think [these cases] aren’t being investigated,” Breuer replied. “They are complicated cases. It took a long time in hatching them and developing them. But they will be brought.”
The system that tracks Suspicious Activity Reports, or SARs, detected a dramatic increase in mortgage fraud starting in 2003, when reports of mortgage fraud nearly doubled within a year from 5,400 to 9,500. By 2007, the number had exploded to 53,000. During those same years, many mortgage lenders dramatically lowered their lending standards. Banks often required no proof of income. Borrowers could even get loans without be able to repay them.
Yet in their reports, banks overwhelmingly have blamed others for fraud. Whenever a borrower’s income was wrong on a loan application, the banks fingered borrowers 87 percent of the time and independent mortgage brokers 64 percent of the time, according to a 2006 Treasury analysis of the SARs. But the bank’s own employees were almost never blamed — only about four times in every 1,000 reports.
That might explain why so few prosecutions have targeted bank insiders.
Another reason for fewer prosecutions against bank employees is that the Federal Bureau of Investigation has far fewer agents working on the current crisis. Deputy Director John Pistole testified before Congress last year that the bureau had 1,000 people working on the S&L crisis at its height. That compares to about 240 agents working on mortgage fraud cases last year.
The FBI dramatically shifted its resources away from white-collar crime and to terrorism after the Sept. 11 attacks.
“We just didn’t have the cops on the beat” during the recent crisis, said Sen. Ted Kaufman, the Delaware Democrat who conducted a hearing on the lack of criminal prosecutions. “I was around during the savings and loan crisis [as a Congressional aide] and we had a lot more folks working it when it went down.”
Even with additional funding from Congress, which Kaufman helped push through, the FBI is budgeted to have 377 people working mortgage fraud cases this year, about a third as many as during the S&L investigations.
Charges Harder to Prove?
Charges in the recent banking crisis may be harder to prove, said Robert H. Tillman, who teaches at St. John’s University and who analyzed data about S&L prosecutions. Savings and loan executives who were convicted often personally approved large commercial loans for projects doomed to fail. Some would use federally insured deposits to pay themselves excessive salaries or to lend money to their own real estate projects. A few even took kickbacks.
This time, lending executives may have encouraged the making of bad loans, but they generally did not personally approve the loans, Tillman said. They didn’t send emails telling the troops to make fraudulent loans but paid big commissions to loan offers who made risky loans. Then the executives were able to reap huge bonuses for making the company look so profitable.
So far, the biggest cases have been civil lawsuits brought by the Securities and Exchange Commission, including most recently a highly publicized securities fraud case against Goldman Sachs and one of its vice presidents, Fabrice P. Tourre. News reports suggest that a referral from the SEC’s enforcement division to the Justice Department has led to a criminal inquiry.
Typically, federal authorities deal with massive financial scandals by picking a few cases they are confident they can win, said Henry Pontell, an expert on fraud at the University of California — Irvine.
This time, the administration may have been more focused on saving failing banks — and an entire financial system — than in prosecuting bank executives, Pontell said. Giving billions in bailout dollars to executives who encouraged fraudulent practices not only could complicate a case, it could prove embarrasing, he added.
§ 152. Concealment of assets; false oaths and claims; bribery
How Current is This?
A person who (1) knowingly and fraudulently conceals from a custodian, trustee, marshal, or other officer of the court charged with the control or custody of property, or, in connection with a case under title 11, from creditors or the United States Trustee, any property belonging to the estate of a debtor; (2) knowingly and fraudulently makes a false oath or account in or in relation to any case under title 11; (3) knowingly and fraudulently makes a false declaration, certificate, verification, or statement under penalty of perjury as permitted under section 1746 of title 28, in or in relation to any case under title 11; (4) knowingly and fraudulently presents any false claim for proof against the estate of a debtor, or uses any such claim in any case under title 11, in a personal capacity or as or through an agent, proxy, or attorney; (5) knowingly and fraudulently receives any material amount of property from a debtor after the filing of a case under title 11, with intent to defeat the provisions of title 11; (6) knowingly and fraudulently gives, offers, receives, or attempts to obtain any money or property, remuneration, compensation, reward, advantage, or promise thereof for acting or forbearing to act in any case under title 11; (7) in a personal capacity or as an agent or officer of any person or corporation, in contemplation of a case under title 11 by or against the person or any other person or corporation, or with intent to defeat the provisions of title 11, knowingly and fraudulently transfers or conceals any of his property or the property of such other person or corporation; (8) after the filing of a case under title 11 or in contemplation thereof, knowingly and fraudulently conceals, destroys, mutilates, falsifies, or makes a false entry in any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor; or (9) after the filing of a case under title 11, knowingly and fraudulently withholds from a custodian, trustee, marshal, or other officer of the court or a United States Trustee entitled to its possession, any recorded information (including books, documents, records, and papers) relating to the property or financial affairs of a debtor,
shall be fined under this title, imprisoned not more than 5 years, or both.
A small real estate data-management company is the focus of a widening legal controversy that could affect millions of U.S. foreclosures, including thousands filed against distressed homeowners in Utah.
The nation’s largest lenders created Mortgage Electronic Registration Systems (MERS), of Reston, Va., in 1994 as a loan registry designed to save millions of dollars on paperwork and recording fees. By registering mortgages with the private computer-tracking system and, in effect, putting loans under MERS’ name, lenders could avoid having to file public documents each time a mortgage was bought and sold.
The arrangement served its purpose well as markets went up. By MERS’s own estimates, it saved mortgage lenders more than $1 billion during a decade, and the efficiencies it brought to mortgage trading played a key role in the growth of mortgage-backed securities and the housing boom.
But with the economic downturn and crush of foreclosures, MERS is now showing up on tens of thousands of foreclosure notices sent to delinquent homeowners, including nearly 3,000 sent in Utah since July 2008, most of them in Salt Lake County.
Here and nationally, the company’s legal status as a party in these actions is increasingly being challenged.
“This is one of the buried, yet-to-emerge bombs in the whole mortgage crisis,” said Christopher Peterson, a University of Utah law professor and author of the first scholarly analysis of MERS and its legal underpinnings, to be published this spring in the University of Cincinnati Law Review . “This has the potential to fundamentally affect the trajectory of our recovery.”
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‘A tax evasion broker’ » MERS officials vigorously disagree, but Peterson contends the MERS system has violated a deep-seated principle of American law — transparency in land-ownership transactions — by effectively removing much of that information from the public record. In so doing, Peterson says, MERS also has served as “a tax evasion broker,” denying counties millions of dollars in recording fees — revenue that might otherwise have funded essential public services.
And now, by allowing actual lenders to pursue foreclosures under MERS’ name instead of their own, Peterson says the company is acting as a “foreclosure doppelganger.”
“Throughout history, executioners have always worn masks,” the U. professor writes in his article, Foreclosure, Subprime Mortgage Lending, and the Mortgage Electronic Registration System .
“In the American mortgage lending industry, MERS has become the veiled man wielding the home foreclosure ax.”
An estimated 1.4 million borrowers have failed to pay their mortgages in more than a year, but continue to live in the properties, according to Lender Processing Services, which tracks mortgages on 40 million homes.
Under the new government regulations, it takes banks 14 months to evict nonpaying borrowers – longer in some states. “Many of these people are gaming the system,” said Ted Jadlos, a managing director at Lender Processing.
Also, banks aren’t in a hurry because once they take possession of a property they must write down its value to reflect market price. Plus, unoccupied homes are more likely to fall into disrepair or be vandalized.
Some analysts predict that this shadow inventory will cause prices to slide further, but so far it’s not happening.
Reprinted from REALTOR® Magazine Online with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright
Lender Processing Inc. is the TIP of The Pyramid; please click the link to see their admission to this whole scheme of fraud in question. As it turns out Big Brother has been watching! Anyone want shares NOW?? Goldman had met with LPS on 2/23 in a GS’s Tecnology and Internet Confrence Presentation. In turn of events following the Wall Street Journal story and amongst many other media articles displaying LPS’s on-going investigations, Brian Chip’s article on SmarTrend identified a Downtrend for Lender Processing Services (NYSE: LPS) on March 31, 2010 at $38.26 stating “In approximately 2 weeks, Lender Processing Services has returned 3.3% as of today’s recent price of $36.99. Lender Processing Services is currently below its 50-day moving average of $38.94 and below its 200-day moving average of $37.98. Look for these moving averages to decline to confirm the company’s downward momentum”. Then two days later LPS (NYSE: LPS) climbed 1.16% to $37.42 after Goldman Sachs upgraded the company’s share from Neutral to Buy with an one year price target of $48. How lucky right? So I guess GS has every right to upgrade LPS since their last meeting with them on possible involvement. But the world is now well aware of GS’s shenanigans thanks to LOUISE STORY and GRETCHEN MORGENSON’s article in the New York Times U.S. Accuses Goldman Sachs of Fraud: THE NEW YORK TIMES, According to the complaint, Goldman created Abacus 2007-AC1 in February 2007, at the request of John A. Paulson, a prominent hedge fund manager who earned an estimated $3.7 billion in 2007 by correctly wagering that the housing bubble would burst. Should we put any vailidity into their ratings or upgrades? NOT!
The good thing that came along the 10’s of thousands of visits within the last month, this blog has been used in several court houses.
The Law Offices of David J. Stern has only about 15 attorneys, according to legal directories.
However, it’s the biggest filer of mortgage foreclosure suits in Florida, reports the Tampa Tribune. Aided by a back office that dwarfs the law firm, with a staff of nearly 1,000, the Miami area firm files some 5,800 foreclosure actions monthly.
The back-office operation, DJSP Enterprises, is publicly traded and hence must file financial reports with the Securities and Exchange Commission. It netted almost $45 million in 2009 on a little over $260 million in gross revenue that year. The mortgage meltdown of recent years apparently has been good to the company: In 2006, it earned a profit of $8.6 million on $40.4 million in revenue.
Stern, who is the company’s chairman and chief executive officer, could not be reached for comment, the newspaper says.
His law firm has been in the news lately, after one Florida judge dismissed a foreclosure case due to what he described as a “fraudulently backdated” mortgage document, and another said, in a hearing earlier this month concerning another of the Stern firm’s foreclosure cases, “I don’t have any confidence that any of the documents the court’s receiving on these mass foreclosures are valid.”
Earlier coverage:
ABAJournal.com: “Judge Dismisses Mortgage Foreclosure Over ‘Fraudulently Backdated’ Doc”
Dear Honorable Judges in Foreclosure and Bankruptcy Proceedings:
This letter concerns how a Jacksonville, Florida publicly-traded company, Lender Processing Services, Inc. solves Deutsche Bank National Trust Company missing documents in foreclosure cases. Deutsche Bank National Trust Company (“DBNTC”) is the plaintiff in the majority of foreclosure actions filed in thousands of counties in America since 2007. Deutsche Bank is sometimes referred to as “America Foreclosure King.” There is currently a Department of Justice investigation of LPS and its influence over law firms in foreclosure actions, according to an article in the Dow Jones Daily Bankruptcy Review on April 16, 2010.
In these foreclosure actions, DBNTC is usually acting as the trustee for a mortgagebacked securitized trust. This means that a securities company made a commodity out of approximately 5,000 mortgages that were bundled together. The notes in the trust have a face value of approximately $1.5 billion in each trust. Investors buy shares of these trusts. Deutsche Bank is the most common name in the business of being a Trustee for Mortgage-Backed trusts. Other banks very active in this role of Trustee include Wells Fargo, U.S. Bank, Citibank, Bank of New York, JP Morgan Chase and HSBC.
When each of these trusts was made, the securities company responsible for the securitization (often Financial Assets Securities Corporation in Greenwich, Connecticut) was supposed to have obtained mortgage assignments showing that the trust had acquired each mortgage and note from the previous owner, which was most often the original lender. The trust documents specify that the mortgages, notes and assignments in recordable from will have been obtained by the trust. Most mortgage-backed trusts included the following or equivalent language regarding Assignments:
Assignments of the Mortgage Loans to the Trustee (or its nominee) will not be recorded in any jurisdiction, but will be delivered to the Trustee in recordable form, so that they can be recorded in the event recordation is necessary in connection with the servicing of a Mortgage Loan.
Trustees take very few actions relating to the individual properties in the trust. Typically, the bank acting as a trustee for a mortgage-backed trust hires a mortgage servicing company to deal with issues involving the individual mortgages in the trust. The mortgage servicing companies in turn hire a “default management company” to foreclose when a homeowner defaults on payments on a loan that is part of the trust. Lender Processing Services in Jacksonville, Florida, is the largest mortgage default management company. Deutsche Bank National Trust Company uses several mortgage servicing companies, but most often uses American Home Mortgage Servicing, Inc. in Irving, Texas as its mortgage servicing company.
In tens of thousands of foreclosure cases filed by Deutsche Bank National Trust Company as trustee for a mortgage-backed trust, Deutsche Bank has not produced the mortgage, note or Assignment and instead has filed pleadings claiming that the original mortgage and note were inexplicably lost. In these cases, Deutsche Bank uses specially prepared Mortgage Assignments to show that they have the right to foreclose. These documents were often prepared by clerical employees of Docx, LLC, a subsidiary company of Lender Processing Services, the default management company. Hundreds of thousands of other Mortgage Assignments came from the LPS office in Dakota County, Minnesota. More recently, these documents were produced from the LPS offices in Jacksonville, Duval County, Florida. In thousands of other cases, LPS directs the law firms it hires to use the employees of the law firms to sign as officers of Mortgage Electronic Registration Systems to create the documents necessary for foreclosure
a) Mortgage Electronic Registration Services (MERS) is identified as the grantor and American Home Mortgage Servicing, Inc. is identified as the grantee; within days (or minutes), a second Assignment is filed, identifying American Home Mortgage Servicing, Inc. as the grantor and Deutsche Bank National Trust Company as trustee for the trust as the grantee;
b) a mortgage company no longer in existence is identified as the grantor and American Home Mortgage Servicing, Inc. is identified as the grantee; within days (or minutes), a second Assignment is filed, identifying American Home Mortgage Servicing, Inc. as the grantor and Deutsche Bank National Trust Company as trustee for the trust as the grantee;
c) a mortgage company no longer in existence is identified as the grantor and Deutsche Bank National Trust Company as trustee is identified as the grantee;
d) American Home Mortgage Servicing, Inc., purporting to be the “successor-in-interest” to Option One Mortgage Company, is identified as the grantor and Deutsche Bank National Trust Company as trustee is identified as the grantee;
e) Sand Canyon Corporation, formerly known as Option One Mortgage Company, is identified as the grantor and Deutsche Bank National Trust Company as trustee is identified as the grantee, with no further explanation of how both American Home Mortgage Servicing and Sand Canyon have authority to act for Option One Mortgage.
On several hundred thousand Assignments, the individuals signing as officers of the grantor were actually clerical employees of Lender Processing Services, the mortgage default management company hired by American Home Mortgage Servicing, Inc., working for the grantee – Deutsche Bank National Trust Company. On several hundred thousand Assignments, the very same individuals signed as officers of both the grantor and grantee.
In all of these hundreds of thousands of cases, no Assignment actually took place on the date stated and no consideration was paid by the grantee to the grantor despite the representations in the Assignments. Most significantly, no disclosure was ever made to the Court in the foreclosure or bankruptcy case or to the homeowners in default that the original Assignments to the Trust were never made – or were lost – or were defective and that the recently-filed Assignments were specially made to facilitate foreclosures years after the property was transferred to the trust.
An examination of the signatures on these Assignments shows that many are forgeries, with several different people signing the names Linda Green, Tywanna Thomas, Korell Harp, Jennifer Ohde, Linda Thoresen and many of the other names used on several million mortgage assignments, as I have reported in my article “Compare These Signatures.” Many of these same individuals use at least a dozen different job titles as I have reported in my article, “An Officer of Too Many Banks.” These articles are available at www.frauddigest.com.
Please do not hesitate to contact me for additional information.
Yours truly,
Lynn E. Szymoniak, Esq.
This article could also have been titled:
HOW LENDER PROCESSING SERVICES, INC. SOLVES U.S. BANK’S MISSING PAPERWORK PROBLEM IN FORECLOSURES
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HOW LENDER PROCESSING SERVICES, INC. SOLVES WELLS FARGO MISSING PAPERWORK PROBLEM IN FORECLOSURES
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HOW LENDER PROCESSING SERVICES, INC. SOLVES BANK OF NEW YORK MISSING PAPERWORK PROBLEM IN FORECLOSURES
-or-
HOW LENDER PROCESSING SERVICES, INC. SOLVES CITIBANK’S MISSING PAPERWORK PROBLEM IN FORECLOSURES
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HOW LENDER PROCESSING SERVICES, INC. SOLVES HSBC’S MISSING PAPERWORK PROBLEM IN FORECLOSURES
For a copy of the Exhibits referenced below, please contact szymoniak@mac.com.
Copies of Assignments from MERS to American Home Mortgage Servicing, Inc. are attached hereto as Exhibit 1.
Copies of Assignments from American Home Mortgage Servicing Inc. to Deutsche Bank as Trustee are attached as Exhibit 2.
Copies of Assignments from American Brokers Conduit, a mortgage company no longer in existence at the time the Assignments were made, to Deutsche Bank as trustee are attached as Exhibit 3.
Copies of other Assignments to Deutsche Bank as Trustee signed by employees of Lender Processing Services, working for the grantee Deutsche Bank, but signing on behalf of the grantor mortgage companies or banks, or MERS as nominee for the grantor mortgage companies or banks, are attached as Exhibit 4.
Copies of Assignments from American Home Mortgage Servicing, Inc. as the successorin-interest to Option One Mortgage as grantor and Deutsche Bank as Trustee as the grantee are attached as Exhibit 5.
Copies of Assignments from Sand Canyon, formerly known as Option One Mortgage as grantor and Deutsche Bank as Trustee as the grantee are attached as Exhibit 6.
Copies of Assignments signed by employees of law firms working for Lender Processing Services on behalf of American Home Mortgage Servicing, Inc. and ultimately for grantee Deutsche Bank, where such employees signed as officers of MERS as grantor are attached as Exhibit 7.
Copies of Assignments signed by employees of Lender Processing Services on behalf of grantors and notarized in Duval County, Florida for grantee Deutsche Bank, filed by law firms working for Deutsche Bank are attached as Exhibit 8.
Anytime you have the word “FRAUD” involved in an on-going investigation, It makes you wonder when corps go at it together even more…click the links below to see what I mean.
By Peg Brickley Of DOW JONES DAILY BANKRUPTCY REVIEW
The Department of Justice is conducting a nationwide probe of the company whose automated systems handle half the mortgages in the U.S., looking for evidence Lender Processing Services Inc. (LPS) has “improperly directed” the actions of lawyers in bankruptcy court.
The Jacksonville, Fla., company was spun out last year from Fidelity National Information Services Inc. (FIS), a financial technology giant that is also under scrutiny for its role in court actions, according to documents filed with the U.S. Bankruptcy Court in Philadelphia.
Although the companies say they are providers of electronic information services, the U.S. trustee believes LPS and Fidelity play a “much greater” role in court actions where thousands of homes are at risk of foreclosure, according to Bankruptcy Judge Diane Weiss Sigmund.
“The thoughtless mechanical employment of computer-driven models and communications to inexpensively traverse the path to foreclosure offends the integrity of our American bankruptcy system,” Sigmund wrote in a decision released Wednesday, April 15.
A spokeswoman for Fidelity did not respond to requests seeking comment on the investigation by the Office of the U.S. Trustee, an arm of the Department of Justice whose mission includes safeguarding the integrity of the bankruptcy courts.
Michelle Kersch, a spokeswoman for LPS, said the U.S. trustee has “advised outside counsel for LPS that it is seeking to better understand LPS’ role.” In an e-mail, Kersch pointed out that the judge held the lawyers, not LPS, responsible for the problems in the case before her.
The probe of the mortgage technology operation surfaced in a Philadelphia case after Sigmund started asking questions about the source of false court filings that came from HSBC Mortgage Corp. In pursuit of homeowners Niles and Angela Taylor, HSBC filed the wrong mortgage, gave incorrect payment amounts and claimed the Taylors had missed monthly payments. This “was simply not true,” Sigmund wrote in a 58-page decision.
All over the US there is mass title defects that have been created to our homes…we are being evicted and titles to our stolen homes are being fabricated by means of Forgery/FRAUD! If these homes have been stolen from us…we have the right to claim them back! Let the unsuspecting homeowner who buys your home that it was fraudulently taken from you! What happens when your car is stolen and reclaimed? It goes back to it’s owner!
Stop by, say hello to the new owner of your stolen home and welcome them to the bogus neighborhood! Oh make sure to show some hospitality and bring them a gift…Umm your Foreclosure Mill Docs!
A Florida state-court judge, in a rare ruling, said a major national bank perpetrated a “fraud” in a foreclosure lawsuit, raising questions about how banks are attempting to claim homes from borrowers in default.
The ruling, made last month in Pasco County, Fla., comes amid increased scrutiny of foreclosures by the prosecutors and judges in regions hurt by the recession. Judges have said in hearings they are increasingly concerned that banks are attempting to seize properties they don’t own.
The Florida case began in December 2007 when U.S. Bank N.A. sued a homeowner, Ernest E. Harpster, after he defaulted on a $190,000 loan he received in January of that year.
The Law Offices of David J. Stern, which represented the bank, prepared a document called an “assignment of mortgage” showing that the bank received ownership of the mortgage in December 2007. The document was dated December 2007.
But after investigating the matter, Circuit Court Judge Lynn Tepper ruled that the document couldn’t have been prepared until 2008. Thus, she ruled, the bank couldn’t prove it owned the mortgage at the time the suit was filed.
The document filed by the plaintiff, Judge Tepper wrote last month, “did not exist at the time of the filing of this action…was subsequently created and…fraudulently backdated, in a purposeful, intentional effort to mislead.” She dismissed the case.
Forrest McSurdy, a lawyer at the David Stern firm that handled the U.S. Bank case, said the mistake was due to “carelessness.” The mortgage document was initially prepared and signed in 2007 but wasn’t notarized until months later, he said. After discovering similar problems in other foreclosure cases, he said, the firm voluntarily withdrew the suits and later re-filed them using appropriate documents.
“Judges get in a whirl about technicalities because the courts are overwhelmed,” he said. “The merits of the cases are the same: people aren’t paying their mortgages.”
Steve Dale, a spokesman for U.S. Bank, said the company played a passive role in the matter because it represents investors who own a mortgage-securities trust that includes the Harpster loan. He said a division of Wells Fargo & Co., which collected payments from Mr. Harpster, initiated the foreclosure on behalf of the investors.
Wells Fargo said in a statement it “does not condone, accept, nor instruct counsel to take actions such as those taken in this case.” The company said it was “troubled” by the “conclusions the Court found as to the actions of this foreclosure attorney. We will review these circumstances closely and take appropriate action as necessary.”
Since the housing crisis began several years ago, judges across the U.S. have found that documents submitted by banks to support foreclosure claims were wrong. Mistakes by banks and their representatives have also led to an ongoing federal criminal probe in Florida.
Some of the problems stem from the difficulty banks face in proving they own the loans, thanks to the complexity of the mortgage market.
The Florida ruling against U.S. Bank was also a critique of law firms that handle foreclosure cases on behalf of banks, dubbed “foreclosure mills.”
Lawyers operating foreclosure mills often are paid based on the volume of cases they complete. Some receive $1,000 per case, court records show. Firms compete for business in part based on how quickly they can foreclose. The David Stern firm had about 900 employees as of last year, court records show.
“The pure volume of foreclosures has a tendency perhaps to encourage sloppiness, boilerplate paperwork or a lack of thoroughness” by attorneys for banks, said Judge Tepper of Florida, in an interview. The deluge of foreclosures makes the process “fraught with potential for fraud,” she said.
At an unrelated hearing in a separate matter last week, Anthony Rondolino, a state-court judge in St. Petersburg, Fla., said that an affidavit submitted by the David Stern law firm on behalf of GMAC Mortgage LLC in a foreclosure case wasn’t necessarily sufficient to establish that GMAC was the owner of the mortgage.
“I don’t have any confidence that any of the documents the Court’s receiving on these mass foreclosures are valid,” the judge said at the hearing.
A spokesman for GMAC declined to comment and a lawyer at the David Stern firm declined to comment.
Search this blog and you will see that for months now I’ve been arguing that the “evidence” submitted by Plaintiffs in foreclosure cases does not even come close to meeting the legal and evidentiary requirements for courts to grant summary judgment.
After performing extensive legal research to confirm this hunch, I have drafted and filed detailed memoranda, supported by all available case law, that stands for the proposition that the practices used by virtually every foreclosure mill in the state do not provide the evidentiary basis for a court to grant summary judgment.
So why are courts across this state continuing to grant summary judgment? There really is NO LEGAL BASIS TO SUPPORT THE GRANTING OF SUMMARY JUDGMENT IN THE VAST MAJORITY OF FORECLOSURE CASES CURRENTLY FILED IN COURTS ACROSS THIS STATE.
I attach here the most fantastic transcript of a hearing I’ve heard in a long time. This transcript shows a couple things:
First, the judges in the Sixth Circuit of Florida really, really get it.
Second, this particular judge goes far and above to do his job and deliver real, hard, honest legal work.
Third, as I mentioned above…the current processes and procedures used by the foreclosure mills do not provide courts the evidentiary or legal basis required to grant summary judgment.
But now the big question that comes to mind….now that this judge gets it…and now that my memos and others like my friend and fellow Foreclosure Fighter Mike Wasylik are starting to leak out there…
What happens to all the hundreds of thousands of homes that have been foreclose on by improper evidence?
Some excerpts from the begging of the transcript… Be sure to read it in its entirety. It is an absolute must read…
Gmac Mortgage LLC
v
Debbie Visicaro, et al.
April 7, 2010
THE COURT: Okay, we are here today in GMAC v Visicaro. This is a motion for rehearing the previously drafted motion for summary judgement…
MR. WASYLIK: I am here for Defendants… We have submitted a fairly detailed brief…
THE COURT: What’s the Plaintiff’s position regarding the motion…
MR FRAISER: I object… You’ve considered all the evidence before when you entered the summary judgment back in January 2010. The opposing party then could not support their position on any genuine material facts. Right now, Your Honor, there are no convincing exigent, you know, circumstances being offered up at the time.
THE COURT: Did you not read the motion? It sounds liker you’re making a very generalized argument, and this is an, as I viewed it, extremely targeted motion which basically elaborates on the assertions that were raised at the time of the motion for summary judgment.
As I recall that, counsel appeared on behalf of his clients, I think it was by phone and made arguments that the Court really gave short shrift to it, did not review the case…
Since that time, the Court delved further into it…
I’ve had several events which have occurred in cases which cause the Court to have great concern about the validity of fillings in our mortgage foreclosure cases, and that precipitated my reevaluation of the evidentiary considerations.
I’ll give you an example of that. I have one case that was called up for summary judgment hearing, and I thought it was going to be the typical granted situation, and then a lawyer showed up for the defendant homeowner.
I was beginning to recite to the lawyer what I had typically recited, that there was no affidavit in opposition. And the lawyer said, “Well, I thought you might want to see this,” and handed me some documents which were from another file in our circuit, and it turned out, it was the same note and mortgage that was in a separate and independent file.
There was a different plaintiff pursuing a foreclosure proceeding on the same note and mortgage as the one that was being proceeded on. Both of the cases contained allegations in the original complaints that the separate plaintiffs were owners and holders of the note. Both of them had gone so far to have affidavits filed in support of a summary judgment whereby an individual represented to the court in the affidavit that the separate plaintiffs had possessed the note and had lost the note while it was in their possession.
Interestedly, both affidavits, although they were different plaintiffs, purported the same facts and they were executed by the same individual in alleged capacity as a director of two separate corporations, one of which was ultimately found to me to be an assignee of the original note…
So that really increased my interest in this subject matter, because
I really honestly don’t have any confidence that any of the documents the Courts are receiving on these mass foreclosures are valid…
So I’ve said enough…
Honorable
Anthony Rondolino
Be sure to read the transcript in its entirety below…
“LPS’ characterization of itself as a stranger to this bankruptcy case is unsupported by the evidence. There is a very live case or controversy concerning the conduct of Fidelity in this bankruptcy case.”
“Lawyers must not allow the interests or dictates of a client to control their professional judgment.”
Imagine, if you will, a bank sets up a mortgage backed security. The security is backed by a trust that holds all the mortgages and notes. The trust document says that all of the mortgages that would be included in that particular security had to be transferred into the trust by a particular date. That date is long since passed.
You are now in foreclosure, and attached to the summons and complaint is a copy of an assignment of your mortgage, within the last few days before the date of the summons and complaint, transferring your mortgage into the trust. What does that all mean?
It could mean that the trustee did not actually own your mortgage and that all the money that you have paid on that mortgage that went to pay the holders of the security associated with that trust was paid to the wrong party.
Why? Because the mortgage was not transferred into the trust before your payments were directed to it. And the after the fact assignment doesn’t remedy it, because the trust was required to close the book on adding new mortgages into the trust, on a date long since passed. So, the trustee accepted payments from you even though your mortgage was not a part of that trust. You were paying the wrong party.
Then to add insult to injury, the trustee is trying to take your home away.
Oh, and the last minute assignment –may be a forgery. Ain’t that just the icing on the cake?
These are the cranium exploding allegations being made by white collar fraud expert Lynn Szymoniak, Esq.
In a letter to an Assistant United States Attorney, Ms. Szymoniak alleges
This letter concerns possible fabricated and forged mortgage-related documents that are being filed by banks in foreclosure actions in Massachusetts, Florida and throughout the country.
These documents were prepared by a company known as DOCX, LLC, a company that claims to “expedite” the mortgage foreclosure process for banks and mortgage lenders. DOCX is located in Alpharetta, Georgia, and is owned by a Jacksonville, Florida company, Fidelity National Financial, Inc.
In many cases, DOCX has provided Assignments so that banks that have purchased mortgages from the original lender may pursue foreclosure even when the proper documents have not been prepared, executed and filed. These documents very often appear in cases where the mortgage has been purchased, and combined with others to create to an asset-back security. Deutsche Bank National Trust Company is one of the banks that have frequently used mortgage-related documents prepared by DOCX.
Ms. Szymoniak goes on to reveal that clerks at DOCX are signing these documents pretending to be employees of varies banks and other financial institutions. For example:
… on mortgage documents prepared by DOCX, since January 1, 2006, Linda Green has signed as a Vice President of at least eight different banks and mortgage companies, including: Bank of America, Wells Fargo Bank, Option One Mortgage Corporation, American Home Mortgage Servicing, American Home Mortgage Acceptance, Argent Mortgage Company, LLC, Sand Canyon Corporation, and Mortgage Electronic Registration Systems, Inc., acting solely as a nominee for HLB Mortgage.
Korell Harp’s purported signature appears on documents where he is identified as Vice President of MERS as nominee for Quick Loan Funding, Vice president and Assistant Secretary for Argent Mortgage Company, Authorized Signer for USAA Federal Savings Bank, Vice President of American Home Mortgage Servicing, Inc., as successor-in- interest to Option One Mortgage Corporation, Vice President of American Home Mortgage Acceptance, Inc., and Vice President of Sand Canyon Corporation.
Tywanna Thomas’s purported signature appears on documents where she is identified as Assistant Vice President of MERS, as nominee for Quick Loan Funding, Inc.; Assistant Secretary of MERS, as nominee for American Home Mortgage Acceptance, Inc.; Assistant Vice President of Sand Canyon Corporation, formerly known as Option One Mortgage; and Vice President & Assistant Secretary of Argent Mortgage Company.
Other names that appear on hundreds of DOCX assignments, as officers of many different banks, include Jessica Odhe, Brent Bagley, Christie Baldwin, Cheryl Thomas and Linda Thoresen. These documents have all been notarized in Fulton County, Georgia. An examination of the signatures also reveals that the signatures of the same person vary significantly.
Not Sooooo Fast! What corrections have you made here… exactly?? Have you corrected the families who are torn apart? Have you made corrections to notified all the many who lost their home by this? Have you made corrections to notify the lenders? Click Here
LPS Offers Clarification to Recent Article
JACKSONVILLE, Fla., April 5 /PRNewswire-FirstCall/ — Lender Processing Services, Inc. (NYSE: LPS), a leading provider of integrated technology and services to the mortgage industry, today provided clarification to a recent article published by the Wall Street Journal.
As indicated in LPS’ most recent Form 10-K, filed in February 2010, LPS reported that during an internal review of the business processes used by its document solutions subsidiary, the Company identified a business process that caused an error in the notarization of certain documents, some of which were used in foreclosure proceedings in various jurisdictions around the country.
The services performed by this subsidiary were offered to a limited number of customers, were unrelated to the Company’s core default management services and were immaterial to the Company’s financial results. LPS immediately corrected the business process and has completed the remedial actions necessary to minimize the impact of the error.
LPS subsequently received an inquiry relating to this matter from the Clerk of Court of Fulton County, Georgia, which is the regulatory body responsible for licensing the notaries used by the Company’s document solutions subsidiary. In response, LPS met with the Clerk of Court, along with members of her staff, and reported on the Company’s identification of the error and the status of the corrective actions that were underway. LPS has since completed its remediation efforts with respect to all of the affected documents and believes the Clerk of the Court has completed its review and closed the matter.
As stated in the Company’s Form 10-K, the U.S. Attorney’s office for the Middle District of Florida is reviewing the business processes of this subsidiary. LPS has expressed its willingness to fully cooperate with the U.S. Attorney. LPS continues to believe that it has taken necessary remedial action with respect to this matter.
About Lender Processing Services
LPS is a leading provider of integrated technology and services to the mortgage industry. LPS offers solutions that span the mortgage continuum, including lead generation, origination, servicing, portfolio retention, risk management and default, augmented by the company’s award-winning customer support and professional services. Approximately 50 percent of all U.S. mortgages are serviced using LPS’ MSP. LPS also offers proprietary mortgage and real estate data and analytics for the mortgage and capital markets industries. For more information about LPS, please visit www.lpsvcs.com.
Action Date: April 4, 2010 Location: Jacksonville, FL
In the first 3 days of April, 2010, the Wall Street Journal and the Jacksonville Business Journal both reported that Lender Processing Services was the subject of a federal criminal investigation involving a subsidiary company, Docx, LLC in Alpharetta, Georgia. A representative of the company reportedly acknowledged the investigation. Foreclosure defense blogs, and this website, have reported some of the problems with mortgage assignments prepared by Docx including Assignments where the grantor or grantee was described as “Bogus Assignee for Intervening Asmts” or “A Bad Bene.” Docx also produced many assignments with an effective date of 9/9/9999. In other cases, the effective date was listed as 1950. Other Assignments listed the amount of the original mortgage as $.00 or $.01. Still other assignments were missing signatures. The Docx office has produced over one million mortgage assignments in the last few years and filed these assignments in recorders’ offices across the country. How many Assignments were defective? Did any foreclosures occur based on the defective documents? Were court clerks notified of the defective assignments? Were borrowers notified? Were mortgage companies and banks notified? The company disclosures to date raise even more questions regarding the role of document mills in the national foreclosure crisis. Courts and litigants everywhere will be waiting for more complete disclosures.
CHICAGO (Reuters) – A unit of Lender Processing Services Inc, a U.S. provider of paperwork used by banks in the foreclosure process, is being investigated by federal prosecutors, the Wall Street Journal reported on Saturday.
Citing people familiar with the matter, the newspaper said a government probe into the business practices of the LPS unit was “criminal in nature.” According to the report, the probe was disclosed in LPS’s annual report in February.
The subsidiary being investigated is Docx LLC, which processes and sometimes produces documents used by banks to prove they own mortgages, the report said.
According to the report, among Docx documents being reviewed was one that incorrectly claimed an entity called “Bogus Assignee” was the owner of the loan.
The report cited LPS spokeswoman Michelle Kersch as saying that the “bogus” phrase was used as a placeholder and that some documents had been “inadvertently recorded before the field was updated.”
Keep in mind this is only on the Georgia Subsidiary “DocX” mean while back at the ranch in Minnesota much, much, much more fraud has been created see the videos below.
A subsidiary of a company that is a top provider of the documentation used by banks in the foreclosure process is under investigation by federal prosecutors.
The prosecutors are “reviewing the business processes” of the subsidiary of Lender Processing Services Inc., based in Jacksonville, Fla., according to the company’s annual securities filing released in February. People familiar with the matter saythe probe is criminal in nature.
Michelle Kersch, an LPS spokeswoman, said the subsidiary being investigated is Docx LLC. Docx processes and sometimes produces documents needed by banks to prove they own the mortgages. LPS’s annual report said that the processes under review have been “terminated,” and that the company has expressed its willingness to cooperate. Ms. Kersch declined to comment further on the probe.
A spokesman for the U.S. attorney’s office for the middle district of Florida, which the annual report says is handling the matter, declined to comment.
The case follows on the dismissal of numerous foreclosure cases in which judges across the U.S. have found that the materials banks had submitted to support their claims were wrong. Faulty bank paperwork has been an issue in foreclosure proceedings since the housing crisis took hold a few years ago. It is often difficult to pin down who the real owner of a mortgage is, thanks to the complexity of the mortgage market.
During the housing boom, mortgages were originated by lenders, quickly sold to Wall Street firms that bundled them into debt pools and then sold to investors as securities. The loans were supposed to change hands but the documents and contracts between borrowers and lenders often weren’t altered to show changes in ownership, judges have ruled.
That has made it hard for banks, which act on behalf of mortgage-securities investors in most foreclosure cases, to prove they own the loans in some instances.
LPS has said its software is used by banks to track the majority of U.S. residential mortgages from the time they are originated until the debt is satisfied or a borrower defaults. When a borrower defaults and a bank needs to foreclose, LPS helps process paperwork the bank uses in court.
LPS was recently referenced in a bankruptcy case involving Sylvia Nuer, a Bronx, N.Y., homeowner who had filed for protection from creditors in 2008.
and this is their video of the Minnesota Branch where they worry about “security”. I wonder if Christina Allen, Topako Love, Eric Tate, Laura Hescott were in this video?? Listen towards (4:41), they use “Delivery” or “Destruction“.
LPS statement “Technical Error” how about “HUMAN Robo-Signors FORGING, FABRICATING ERROR” to many tens-of- thousands (possibly in the miilions) of Assignmnet FRAUD “errors”. Preparing Docs in one state, Executing them in another and Notarizing in another? How about the signatures not matching the people who are signing? What about the folks in Minnesota where most of these were signed?
Jacksonville Business Journal – by Rachel Witkowski Staff reporter
The U.S. Attorney’s Office in Tampa is investigating a subsidiary of Lender Processing Services Inc. that processes mortgage documents for lenders.
Jacksonville-based company (NYSE: LPS) stated in its 2009 annual report that the U.S. Attorney’s Office of the Middle District of Florida recently began inquiring about the business processes of a subsidiary, DOCX LLC, based in Alpharetta, Ga.
LPS also acknowledged that there was an “error” in DOCX’s business processes and LPS immediately corrected it, according to the annual report filed with the U.S. Securities and Exchange Commission.
“We have representatives speaking with the U.S. Attorney’s Office and we are cooperating with all inquiries made by the U.S. Attorney’s Office,” said Michelle Kersch, LPS’ senior vice president of marketing and corporate communications, in an e-mailed response. “We changed the business process that created the technical error, provided additional training to our employees and corrected documents.”
The U.S. Attorney’s Office declined to comment on its investigation.
Kersch said LPS was contacted by the U.S. Attorney’s Office in February. That same month, another investigation by the Clerk of Superior Court in Fulton County, Ga. into DOCX had closed without taking any further action, officials said.
LPS has become a dominant player in the mortgage servicing market since it spun off from Fidelity National Information Services in July, 2008. LPS serviced about 70 percent of the non-performing loan market and 40 percent of foreclosed loans nationwide as of Dec. 31, according to LPS’ latest “mortgage monitor” report.
LPS increased revenue to nearly $2.4 billion in 2009 and recently announcing it will add 350 jobs through 2011. The Jacksonville Economic Development Commission has recommended nearly $3 million in city and state incentives for LPS to add those jobs in Jacksonville.
More to come…
Sample of their work “in-house” Minnesota…not only Alpharetta, GA
A casual conversation about the mechanics of securitization with Neil Garfield MBA JD, Wall Street insider and former trial attorney. Neil is the editor of http://www.LivingLies.Wordpress.com, the leading internet resource on foreclosure defense. He explains how the major banks and Wall Street used securitization to bypass traditional regulatory guidelines, and why it is so difficult for judges, lawyers and borrowers to understand what happened. Neil has just released a 2-disk, 4-hour foreclosure defense DVD set – The Garfield Continuum: Seminar for Laymen. A version for attorneys follows shortly. The DVD and the accompanying Workbook can be purchased at http://www.LivingLies-store.com
Thats in stark contrast to prosecutions during the savings and loan scandal two decades ago, when the government’s strategy targeted and snagged some of banking’s most powerful players. The approach back then succeeded in sending scores of S&L executives to prison, as well as junk-bond king Michael Milken and business tycoon Charles Keating Jr.
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