We’ve written from time to time that the train wreck in foreclosure-related procedures is the direct result of widespread, possibly pervasive failure to convey borrower IOUs (notes) to securitization trusts as stipulated in the governing documents (the pooling & servicing agreement). Because key actions had to be taken by dates long past, and the contracts that governed these deals are rigid, there isn’t a permissible way to get notes that weren’t conveyed properly to trusts on time there now. So the fix has been document fabrication and forgeries. We thought we’d provide a specific example for reader edification.
One thing that foreclosure defense attorneys have seen as a huge red flag of servicer chicanery is the use of allonges. An allonge is a separate piece of paper used for endorsements that is required by the Uniform Commercial Code to be “affixed” to the note and used for endorsements when there is no more space left on the note for signatures. Allonges were pretty much never seen until the robosigning scandal, since all the space on a note (meaning the back and the margins) can be used for endorsements. But they have a funny way of showing up out of nowhere and solving all the problems with a particular foreclosure. Of course, if an allonge really was “affixed,” it shouldn’t be possible for it to materialize out of nowhere.
So readers can see how this looks up close, I’m attaching this pleading from Lynn Szymoniak (the foreclosure fraud investigator who appeared on 60 Minutes and later received $18 million in settling a qui tam case as part of the national foreclosure settlement). Lynn in still embroiled in an an ongoing foreclosure fight and a major bone of contention is whether the party trying to foreclose has standing.
I suggest you read this filing in full; it’s pretty comprehensible on its own. For newbies to this sort of thing, one thing that is it important to understand is that all the documents pertaining to a specific mortgage (the note, the mortgage, which is the lien on the property, title insurance, etc) go in a single file called a collateral file. It is supposed to be with the trustee or a custodian hired by the trustee, unless it has been sent out for a specific purpose. The documents in a collateral file are put in in a particular order (generally chronological) and are supposed to remain in that order.
Notice also that Szymoniak’s argument about mishandling or worse of her files rests on extensive photographic evidence. Borrowers fighting banks take note.
The efforts to tidy up the files are so amateurish that it seems clear that the law firm never expected to be challenged. Crudely renumbering pages? New holes appearing in the magically appearing allonge (after the note miraculously ceased being lost and materialized) when it was in the custody of the law firm to make it look as if it had been stapled to the note. And Lynn adds this by e-mail:
It is even worse in my case because the allonge served on me in December 2009 is different from the allonge in the court file.
The Allonge served in Dec. 2009 had a book and page number as if it had been filed in the county records – but it turned out that had been cut from the top of my mortgage and pasted on the allonge.
That occurred when the first firm – Marshall Watson – was representing Deutsche Bank.
I think this document altering is much more frequent that homeowners and their lawyers realize.
This is the sort of thing the mortgage settlement is trying to cover up. But nothing in the settlement addressed the underlying failure to convey the notes properly to securitization trusts (and a special servicer last week told me she sees serious title problems in whole loans too). So the servicers are guaranteed to continue to engage in fraud in order to foreclose. There assumption now seems to be that with the authorities having cast their lots with the banks, no one will call these abuses out.