Monday, July 25, 2011

AREN'T YOU PISSED OFF?

AG’s Waiving Prosecution of Banks’ Foreclosure Fraud, Leaving America in the Dust

Posted on July 25, 2011 by Neil Garfield

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EDITOR’S NOTE: It’s Monday and so we must be in the twilight zone. The Wall Street Banks have engaged in multiple schemes to corner the market on money and now they are cornering the market on land — all with other people’s money whom they never intended to pay back. Now they are going to get a waiver that lets them go free for crimes far worse than the 800 people went to jail for in the S&L crisis in the 1980′s. Does anyone care?
They are getting the waiver because the Banks have cornered the market on politicians. They have bought enough of them to turn the tide regardless of the facts and circumstances. Ultimately prosecution is a political decision. Nobody can afford to prosecute all crimes. So it becomes a decision as to which ones to go after.
In this case, the Banks swindled homeowners into fake loans that forever corrupts title to most residential property in the the nation. They faked the appraisals, putting people in the position of losers in a fight they didn’t even know was going on. The one set of people who could not afford to take losses in the hundreds of thousands of dollars are consumers. But that is exactly where the AG’s are heading, because they all have ambitions to be governor and the Banks can make that happen.
The banks lied, perjured themselves, forged millions of documents, to get a free house, thus cheating both homeowners and investors.
People have murdered their family and committed suicide. Millions have lost homes, jobs and life-style passing on a legacy of poverty to the next generation. Investors all over the world have been swindled out of cash for pensions and operations. The credibility of our financial system is hovering just above zero. Just how bad does it have to get before YOU and YOUR FRIENDS take to the streets and let the politicians know that they will be selling shoes after the next election. Yes, a real job.
The message the AG’s are sending is this: If you do it once, you go to jail. If you do it a lot, you become a powerful and rich politician. Amen to April Charney comments about helping the AG’s. Count us in.

The Banks Still Want a Waiver

By 
HOW should banks atone for those foreclosure abuses — all the robo-signing and shoddy recordkeeping that jettisoned so many people from their homes?
It has been four months since a deal to remedy this mess was floated. Not much has happened since — at least not publicly.
Last week, banking executives and state attorneys general met in Washington to try to settle their differences. At issue was how much banks should pay, and how and to whom, to make this all go away. The initial terms, which emerged in March, were said to carry a $20 billion price tag.
But here is a crucial question: to what extent would such a settlement protect banks from future liability? Will the attorneys general strike a deal that effectively prevents them from bringing new, unrelated lawsuits against the banks?
If the releases in any settlement are broad, there will be joy in Bankville. If they are narrow, the banks will probably face more litigation, something they would rather avoid.
A looming issue relates to the potential liability stemming from the Mortgage Electronic Registry Systems, or MERS. This company, owned by the major banks, was set up in the mid-1990s by the Mortgage Bankers Association, Fannie Mae and Freddie Mac. Its goal was to expedite the home loan process.
By eliminating the need to record changes in property ownership in local land records, MERS ramped up profits for lenders. In 2007, MERS calculated that it had saved the industry $1 billion over 10 years. An estimated 60 percent of all home loans were registered to MERS.
But the MERS machine started to sputter during the foreclosure crisis. Lawyers challenged MERS’s ability to bring foreclosure proceedings because the system does not technically own the security or note underlying properties, as required. While some courts have not objected to MERS’s foreclosing in place of banks, others have.

New York courts, for instance, have been increasingly hostile to MERS. In a February 2011 opinion, Robert E. Grossman, a federal judge on in Long Island, wrote: “This court does not accept the argument that because MERS may be involved with 50 percent of all residential mortgages in the country, that is reason enough for this court to turn a blind eye to the fact that this process does not comply with the law.”

Equally troubling for MERS is the fact that its officials have filed questionable documents with courts attesting to ownership of the notes and other significant matters.
These practices have consequences, as described by R. K. Arnold, MERS’s former president, in a 2006 deposition. “We are heavily at risk as far as, you know, having to follow the rules of the court and enforcing our rules that our members must go by,” he said. “We also have jeopardy as far as if we were to fail in the foreclosure realm.”
David Pelligrinelli, president of AFX Title, a title search company, said MERS contributed to the problem of thousands of mortgages lacking a complete ownership chain.
“You can’t go back and redocument all these things, because some of the companies aren’t around anymore,” he said. “Even if they are, the charters for these companies don’t allow for backdating of assignments.”
How MERS and its bank owners will fare with the attorneys general is unclear. The early term sheet for the possible settlement said only this: “Issues relating to the use and performance of MERS are reserved for further discussion.” Those further discussions may be taking place now. It’s a good bet that the banks want a comprehensive release from liability relating to MERS.
Officials at the nation’s top four banks declined to comment on the private talks. A spokeswoman for MERS said it was not participating in the discussions and could not speculate on them.
Lawyers who have examined this issue say it would be unprecedented to grant a broad release from liability to the banks that own MERS from claims that have not been investigated.
WHILE some states are scrutinizing MERS, most have declined to investigate its operations. That might seem surprising, given the apparent conflicts of interest in its business. Employees of law firms representing banks in foreclosures, for instance, are also officers of MERS. They can assign mortgages even though they represent a party with an interest in the outcome.
A broad release would vastly diminish the possibility of an in-depth investigation. Such a release might also make it harder for borrowers to argue that MERS has no right, or standing, to foreclose on them. The United States Trustee has supported this view in a number of recent cases, but exempting banks from future lawsuits on this issue would send a message that questioning MERS’s standing is of no interest to top state officials.
And if the banks are insulated from future state lawsuits, responsibility for any abusive acts by MERS would be pushed onto law firms that did the system’s work. With few assets, these law firms are virtually judgment-proof. The unit of MERS that held title to the mortgages also has few assets and was set up in such a way that lawsuits against it would probably reap little for plaintiffs.
MERS has begun to clean up its practices and paperwork. Officials are furiously assigning mortgages out of MERS’s name and into the banks’ names. One borrower in Pierce County, Wash., combed through records from April 1, 2011, to July 18, and found 1,956 assignments of deeds of trust executed from MERS to banks that service the loans or trustees that oversee mortgage pools.
Sure, the issues surrounding MERS seem mind-numbing. Some officials might want to wash their hands of the whole thing in a settlement. But at least one legal professional is offering to educate attorneys general — at no cost. She is April Charney, a lawyer at Jacksonville Area Legal Aid in Florida and one of the first to question MERS’s standing in foreclosures.
“You need lawyers in each state to be legal consultants to the A.G.’s so they’re on equal footing with the huge industry they are up against,” she said. “It would be an honor to consult on these highly complex, layered and nuanced state-based legal issues. Call it pro bono with bells on.”
It would be telling if no one takes her up on that offer.
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2 Responses

  1. marilyn lane, on July 25, 2011 at 8:40 am said:
    this
    think tankvideobook clubweekend
    AboutContactManaged AssetsSpeakingDisclosures « Fast Money: Bull Market or BS?Time Loves a Hero »Why Foreclosure Fraud Is So Dangerous to Property Rights
    By Barry Ritholtz – October 12th, 2010, 8:00AM There seems to be a misunderstanding as to why the rampant and systemic foreclosure fraud is so dangerous to American system of property rights and contract law. Some of this is being done by people who are naked corporatists (i.e., the WSJ Editorial Board) excusing horrific conduct by the banks. Others are excusing endemic property right destruction out of genuine ignorance.
    This morning, I want to explain exactly why this RE fraud is so dangerous, and explain the significance of the rights that are currently being trampled. I also want to demonstrate that the only way the nation could have the quantity and magnitude of errors we see is by willful, systemic fraud.
    Perhaps this commentary will allow for a more intelligent debate of this issue, and focus on what can be done to fix the problems, rather than the blind parroting of talking points.
    ~~~
    The process of purchasing a home in America culminates with an event called “the Closing.” It is an hour plus long contract signing that ensures the buyer is legitimately taking title, possession and legal ownership of a unique parcel of land and any structures upon it. The process gives any buyer specific rights to that property that cannot be abrogated under the laws of the United States.
    At the closing, buyers sign and initial numerous documents. The goal is to accomplish the following:
    1) Papers are signed that will be filed with the County Clerk (or appropriate officer) along with recording fees, for the official transfer of title from the prior owner to the new owner. The enabling purchase loan (i.e., mortgage note) is also filed with the Clerk.
    2) The buyer receives title (ownership) of the land;
    3) The mortgage lender establishes a new interest in that property contingent upon their mortgage note;
    4) All other claims, liens, tax obligations and prior mortgages, home equity lines or second notes are satisfied and extinguished before title passes to the new owner.
    5) Third party claims of any interest in that property superior to the buyer are eliminated;
    6) Title Insurance is purchased and issued so the buyer has a recourse in case of defects in ownership occurs.
    Every step of the process is designed to protect the property rights of all parties. The result is more than a mere transaction selling property from one party to another; rather, this has created a system where ownership interests are clearly defined; where title history can be reviewed going back decades and centuries. There is a certainty to the purchasers of this property against all future claims.
    Everything about this process has been created to make sure the transfer goes off perfectly. In a nation of laws, contract and property rights, there is no room for errors. Indeed, even small technical flaws can be repaired via a process called “perfecting title.”
    As we noted previously, esteemed economists such as Hernando de Soto have identified that the respect for title, proper documentation, contract law and private property rights are the underlying reason capitalism works in Western nations, but seems to flounder elsewhere.
    We cannot have free market capitalism without this process. So what does it mean if banks have been systemically, fraudulently and illegally undermining this process?
    ~~~
    The closing process described above took place with all parties participating voluntarily. The buyer wants the house, the seller wants the transaction, the financing bank wants to make the mortgage loan.
    What happens during a proper foreclosure? The prior closing is essentially reversed, only its done involuntarily. The process requires another RE closing, only this time, the Note holder is exercising their right to repossess the house if the borrower has failed to uphold the terms of the mortgage note. It typically states that if a borrower fails to make the requisite payments, they become delinquent. After an extended period of delinquency, they go into default. That allows the note holder to exercise their rights to foreclose on the property, and take title and possession.
    The same care and attention to detail that occurred during the initial closing must also occur in the foreclosure process. All of the steps noted in our initial closing must occur here also. But since it is an involuntary process for the (soon-to-be former) property owner, extra care must be taken to make sure that property rights are being maintained and respected. The entire process is, if anything, is even more rigorous.
    The law does not tolerate any errors in this process. What does the foreclosure process legally require? It varies by state and mortgage note, but the following is a good outline:
    1) Notice of Delinquency is sent to a borrower who has fallen behind his payment schedule;
    2) Notice of Default is sent to a delinquent borrower who has missed the requisite number of mortgage payments;
    3) Notice of Foreclosure is sent to the defaulted borrower, and the process begins;
    4) Affadavit by the bank’s representative are signed attesting to: Ownership of the note, who the borrower is, the property in question, the date of last mortgage payment, amount of delinquency, tax escrow owed, other payments (such as homeowners insurance);
    5) Notarized documents: A Notary Public affirms that the affidavit was actually signed by the signatory, and this allows it to be entered into the court as documentary evidence;
    6A) Notice of Pendency (Lis Pendens) is filed with the County Clerk putting the world on notice as to the foreclosure action;
    6B) Summons and Complaint are prepared by bank attorneys, who further verify the specific information attested to by the bank executives. The attorneys then file the Complaint, commencing the Foreclosure Action;.
    7) Service of Process is filed, either hand delivered to the home owner, or nailed to the door of the home;
    8) Referee is Appointed to review and process the case; calculate the amount owed, and report back to the Court; The Referees report is also notarized;
    9) Judgment of Foreclosure is moved for by Note holder;
    10) Court orders the property auctioned. The court specifies a notice of the auction, publicizing the property auction;
    11) Bidders must Close on the auctioned house in 30-90 days; In the event of no sale, the bank takes possession (REO);
    The fraud that has come to light are primarily occurring in steps 4, 5, 6 and 7. The verification of the specific data that is mandated legally is not taking place by bank executives. Reviewing a file can take anywhere from, 20 minutes to well over an hour. Yet some bank employees are testifying that they have signed off on as many as 150 per day (Wells Fargo) or 400 per day (Chase).
    It is impossible to perform that many foreclosure reviews and data verifications in a single day. The only way this could happen is via a systemic banking fraud that orders its employees to violate the law. Hence, how we end up with the wrong house being foreclosed upon, the wrong person being sued for a mortgage note, a bank without an interest in a mortgage note suing for foreclosure, and cases where more than one note holders are suing on the same property that is being foreclosed.
    This is more than mere accident or error, it is willful recklessness. When that recklessness is part of a company’s processes and procedures, it amounts to systemic fraud. (THIS IS CRIMINAL AND SHOULD BE PROSECUTED).
    The next step in our cavalcade of illegality is the Notary. Their signature and stamp allows these fraudulent documents to be entered into court as actual evidence (no live witness required). Hence, we have no only fraud, but contempt of court on top of it (BOTH OF WHICH REQUIRE PROSECUTION).
    Law firms preparing the legal documents are not doing their job of further verifying the information. And, it seems certain states such as Florida have foreclosure mills who were set up from the outset as fraudulent enterprises. (EVEN MORE PROSECUTION NEEDED).
    Lastly, some service processors are not bothering to do their job. This is the last step in the foreclosure proceedings that would put a person on notice of the errors (YET MORE FRAUD).
    There are multiple failsafes and checkpoints along the way to insure that this system has zero errors. Indeed, one can argue that the entire system of property rights and contract law has been established over the past two centuries to ensure that this process is error free. There are multiple checks, fail-safes, rechecks, verifications, affirmations, reviews, and attestations that make sure the process does not fail.
    It is a legal impossibility for someone without a mortgage to be foreclosed upon. It is a legal impossibility for the wrong house to be foreclosed upon, It is a legal impossibility for the wrong bank to sue for foreclosure.
    And yet, all of those things have occurred. The only way these errors could have occurred is if several people involved in the process committed criminal fraud. This is not a case of “Well, something slipped through the cracks.” In order for the process to fail, many people along the chain must commit fraud.
    That it is being done for expediency and to save a few dollars on the process is why the full criminal prosecution must occur.
    ~~~
    The approach of most Western nations to property is an important legacy. In the United States, it has been enshrined in the Constitution. Even the rare exercise by the State to take private property during Eminent Domain requires an extensive and proper process. The Fifth Amendment to the US Constitution guarantees that no “private property be taken for public use, without just compensation.” The Supreme Court has detailed the process required for the State to seize any citizen’s private property without the owner’s consent.
    There is simply no reason we should tolerate unlawful property seizure merely when it is done by banks. They are not the State, not the King, and not above the law.
    >
    Previously:
    Man without Mortgage Loses Home in Foreclosure (September 23rd, 2010)
    Florida’s Ongoing Foreclosures Nightmare (September 29th, 2010)
    How ‘Flawed’ Is Foreclosure Paperwork? (October 4th, 2010)
    Foreclosure Fraud Reveals Structural & Legal Crisis (October 5th, 2010)
    Are WSJ OpEd Writers Clueless or Liars? (October 11th, 2010)
    PERMALINK
    Category: Credit, Foreclosures, Legal, Real Estate, Really, really bad calls, Regulation, Taxes and Policy.
    Tweet Facebook Digg this! Reddit Comments
    Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.
  2. BSTL, on July 25, 2011 at 8:40 am said:
    If the AG’s buckle, then the people of this country should start playing by the banks own rules and quit claim their properties 10 layers deep and around the world and back to themselves in offshore trust accounts, blah, blah, blah, and make it impossible for the banks to ever find owners….
    My father was a Chief Asst. State Atty in FL (20th JD) for about 14 years in the late 60′s, 70′s to early 80′s or so and still practices in privately in the state. I grew up in a household in which I heard about him going after white collar criminals all the time. He loved them. He ate their lunch, the bigger and more powerful, the more fun for him. He took down judges and sheriff’s, loved corruption almost more than street crime, and I have to admire him for that. Question is, where have all those people in public office gone? Everyone is on the dole and looking and covering everyone else’s ass and don’t want to be the last person standing without having secured their own golden parachute….They should all be aware that when the people have no jobs, and no homes, then they will have no fear, and the blowback will not be pretty. We will not forgive and will not forget.

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