By Michael Olenick, founder and CEO of Legalprise, and creator of FindtheFraud, a crowd sourced foreclosure document review system (still in alpha)
Assignments of mortgages are the legal instruments that transfers ownership of a mortgage from one party to another. In a securitized mortgage, a trust holds thousands of mortgages on behalf of investors. The investors in the various bonds that get cash flows from a single trust expect the trust to be in a position to take advantage of the rights conferred by the mortgages when certain events occur, usually payoff or default.
I used my crowd-sourced online software, www.findthefraud.com, to help categorize 2,500 assignments in Palm Beach County, FL, which were recorded in late 2008 and early 2009. Palm Beach County, like any Florida county, is a high foreclosure state and, thanks to strong public records laws in Florida, serves as a good bellwether about bank business practices both in Florida and around the country.
Common sense would say that an assignment should be executed either by a lawyer for the trustee for the trust, or an agent of the trust, which in this case would be a servicer or a lawyer working for the servicer. Lawyers should be geographically close to the foreclosed property, because they will need to eventually appear in court. Bankers should be close to major banking operations, since they almost always sign as senior officials: Vice President is the most typical title.
We know from the robo-signing scandal that the signers don’t read what they’re signing, but it is also apparent that they’re scattered almost randomly around the country.
In my 2,500 sample size I studied the county of notarization, which indicates where the primary signers are since the notary attests the documents were signed in front of him or her. This batch of assignments were signed in 35 different states, and 101 different counties. So much for consistency.
The most common county is San Bernardino, CA, which filed 746 mortgage assignments, 29.8% of the total. California overall notarized 815 Florida assignments, 32.6% of the total. Florida, which you’d expect, came next with 610 assignments, or 24.4% of the total, followed by Minnesota (9.3%), Texas (7.3%), Ohio (4.8%), Georgia (4.5%), Louisiana (2.8%), and Nebraska (2.6%). All other states had less than 2%.
Certain counties really stood out from others.
It isn’t clear why San Bernardino, a large portion which consists of the Mojave desert, signed off on almost one in three assignments for Palm Beach County, FL, a tropical oasis on the other side of the country. The overwhelming majority of these assignments involved HSBC or US Bank. Virtually every assignment from San Bernardino had the notarization page entirely separate from the actual assignment, despite more than adequate space for the notarization on the first page, the practice virtually everywhere else. The notary is signing, under penalty of perjury, that the document was signed in front of them and that everything on it is kosher. If I didn’t know better — and, actually, I don’t — it almost looks like the notarization pages and the assignments were being prepared separately then put together after the fact.
After California and San Bernardino comes Florida. Of the 610 assignments inked in a more reasonable state 330, over half, were signed in Broward County. Broward, which adjoins Palm Beach County, seems more reasonable except that the overwhelming majority of these assignments were executed either by the law firms of David J. Stern or Marshall Watson.
Stern’s firm, the poster child of foreclosure fraud, was shut down after the GSEs banned him. That resulted in a mad dash by banks and the GSEs to recover about 100,000 files. Edward DeMarco, head of the FHFA that oversees the GSEs, Stern’s largest client, testified to Congress a couple weeks ago he was “puzzled” why crooked lawyers hadn’t yet been disciplined, a clear reference to Stern. Like DeMarco, every person I know in FL is also puzzled, and many are more than a little annoyed with our state’s bar association. Marshall Watson, the other high-volume signer, paid a $2 million fine to the FL Attorney General then was dropped by Freddie Mac. OK, so maybe closer geographic proximity does not lead to higher quality.
Next comes the 219 assignments inked in Dakota County, MN, out of a total of 233 signed in MN. Dakota County is apparently home to a branch of Lender Processing Services (LPS), an organization that, as Matt Stoller pointed out earlier this week, appears to be perennially in trouble yet which — except for a large decline in their stock price — seems to miraculously escape unfazed. To summarize, mortgage assignments for homes in a tropical paradise are being assigned in the desert and a frozen tundra; maybe this is an odd climate diversity experiment? The Dakota County assignments, like the Broward assignments, are from a hodge-podge of banks; none stood out.
Fulton County, GA had 105 assignments, out of 113 signed in GA, all but one from LPS-owned and now defunct DocX. Of those, the overwhelming majority involved American Home Mortgage Servicing, Inc. or American Brokers Conduit. DocX is the now-shuttered company that was featured on 60 Minutes because they employed teenagers to act as “surrogate signers” for infamous robosigner Linda Green.
Another notable county is Franklin County, OH, with 89 assignments, out of 120 signed in OH. Franklin County was singled out by the former Ohio Secretary of State, Jennifer Bruner, for notary fraud related to foreclosures. Bruner went so far as to refer foreclosure fraud to the US Dept. of Justice and publicly urged President Obama to take a leadership position on foreclosure fraud. Bruner’s appeal fell on deaf ears by the President that promised Hope but instead delivered HAMP, the disastrous program that tricks borrowers into foreclosure via fake modifications.
Two other interesting counties in the top-ten are Ouachita Parish, LA (65 assignments), and Scotts Bluff County, NE (64 assignments). Ouachita is the larger of the two counties, with 150,051 people, and includes Monroe, LA. Scotts Bluff, which Wikipedia touts having the third largest airport in Nebraska, and the census says contains 36,970 people. It isn’t clear why these two tiny counties seem to be cranking out mortgage assignments for far-away Palm Beach County. All but one of the Ouachita assignments involved JP Morgan/Chase Home Finance. Similarly, all but one of the Scotts Bluff assignments involved Aurora Home Loans.
I don’t know if these assignments are illegal, or even if they’re unethical, but stealthily moving vast amounts of property for far away communities seems strange: an eye popping amount of mortgages changed hands with these assignments.
Robosigning is not a victimless crime. The reason we have careful, document-intensive processes for handling real property is that it is the foundation of a nation’s wealth. A home is most families’ biggest asset. The practice of having independent parties verify the validity of signatures dates back to the 1677 Statute of Frauds. It was implemented because the lax evidentiary standards of the early 1600s allowed rich people to hire experts who would swear falsely in court about the ownership of property. The result was court-sanctioned theft and rising disorder.
There are plenty of legal, ethical, economic, and financial problems with document abuses and fraud. But more than any single problem, robos rob trust. Banks are using faceless robos in rural California, Louisiana, and Nebraska to rob the people of Palm Beach County of the protection of the law and in many cases, their homes. This irrevocably destroys trust, not only with the banks that employ the robos but with everybody else too. Since banks are realistically a commodity but-for trust, you’d think that banks, especially brand-aware consumer banks, would have moved long ago to stem these practices.
Indeed, many banks now claim that they have changed or are in the process of changing. As the new documents roll in to public records we’ll find out. But while banks may have “moved on” plenty of families who lost their homes to these documents have moved out. Parents shelter their children with family, friends, in motels that rent rooms by the night, or in cars. These banks — who have received trillions of dollars of bailout money — can’t simply decry, again, “whoops – our bad,” then expect yet another Get Out of Jail Free card.
The federal government has obviously decided not to bother investigating the extent of the fraud, so I’ll continue my studies, hoping from help from the public and publishing results as the datasets expand. But hopefully, one day, law enforcement and regulators — government employees funded by taxpayer who are trained and tasked to do this type of work — will pick up the burden on their own.