A story at the New York Daily News on a foreclosure case dismissed by Judge Arthur Schack illustrates that the problems that banks are having with foreclosures, which they are characterizing as “technical” or “paperwork” run deeper than that. And that is before you get to the issue that we have discussed at length on this blog, namely, the failure to convey promissory notes and related liens as stipulated by the contract governing mortgage securitizations, the pooling and servicing agreement.
It is important to acknowledge that Judge Schack is an outlier. He was early to take issue with the bank practices in foreclosure filings and details some of the problems he sees on a routine basis:
However, it is also important to bear in mind that Schack’s concerns result strictly from looking at the ability of servicers and trustees to establish that they are really the proper party to be foreclosing. The reason that this is of concern is that there are documented cases of multiple parties showing up to foreclose on a single home, and a party that per the Office of the Comptroller of the Currency was not the noteholder winding up with the home. That means the borrower, having already lost her home, is exposed to the risk of the real noteholder trying to obtain the balance of the mortgage from her.
It seems likely that given all the bad press banks have gotten with improper affidavits, which are a fraud on the court, that some, perhaps many, judges will start scrutinizing foreclosure cases. It’s already happening in Florida. The state had set up special foreclosure courts, called the “rocket docket” because many judges processed cases at a breakneck pace, running roughshod over borrower objections and evidence. Some judges there are now doing what one would expect in a proper proceeding, spending the time needed to hear the homeowner side of the case.
The latest Judge Schack case illustrates the sort of mess that judges are likely to find when they start looking at the plaintiff’s documents and asking basic questions. The overview, from the Daily News:
Shack’s opinion, released by the courts Tuesday, is the most detailed picture yet of the shoddy or fraudulent mortgage paperwork too many of those lenders used.
This is not just a matter of minor technicalities, as the banks and their spin masters want us the believe – the same ones who told us the subprime crisis would blow over.
At the heart of the Drayton case is an Austin, Tex., robo-signer named Erica Johnson-Seck. In July, Johnson-Seck admitted in a Florida deposition in another case that she “executes 750 foreclosure documents a week; without a notary present; does not spend more than 30 seconds signing each document; [and] does not read the documents before signing them,” Schack noted.
Johnson-Seck’s signature appears repeatedly in documents connected to Drayton’s mortgage, and in several other foreclosure cases Schack dismissed in the past three years.
At different times, she signed notarized documents assigning the loan, claiming to be a vice president of MERS (a private financial recording service for major banks), a vice president of INDYMAC, a vice president of Deutsche Bank and a vice president of OneWest.
Yves here. Did you get that? It isn’t merely that Johnson-Seck was robo signing, but as we will see soon, she was playing multiple roles that were, from a legal and business perspective, in conflict with each other.
Here, a single party has, obviously falsely, played whatever role was necessary to execute documents to convey the mortgage to the trust so the servicer and trustee could foreclose. In the decision (hat tip 4ClosureFraud) Schack goes at some length about how implausible this appears to be:
The Court grants the request of plaintiff’s counsel to withdraw the instant motion for an order of reference. However, to prevent the waste of judicial resources, the instant foreclosure action is dismissed without prejudice, with leave to renew the instant motion for an order of [*2]reference within sixty (60) days of this decision and order, by providing the Court with necessary and additional documentation.
First, the Court requires proof of the grant of authority from the original mortgagee, CAMBRIDGE HOME CAPITAL, LLC (CAMBRIDGE), to its nominee, MORTGAGE ELECTRONIC REGISTRATION SYSTEMS, INC. (MERS), to assign the subject mortgage and note on March 16, 2009 to INDYMAC FEDERAL BANK, FSB (INDYMAC). INDYMAC subsequently assigned the subject mortgage and note to its successor, ONEWEST, on May 14, 2009.
Second, the Court requires an affidavit from Erica A. Johnson-Seck, a conflicted “robosigner,” explaining her employment status. A “robo-signer” is a person who quickly signs hundreds or thousands of foreclosure documents in a month, despite swearing that he or she has personally reviewed the mortgage documents and has not done so. Ms. Johnson-Seck, in a July 9, 2010 deposition taken in a Palm Beach County, Florida foreclosure case, admitted that she: is a “robo-signer” who executes about 750 mortgage documents a week, without a notary public present; does not spend more than 30 seconds signing each document; does not read the documents before signing them; and, did not provide me with affidavits about her employment in two prior cases. (See Stephanie Armour, “Mistakes Widespread on Foreclosures, Lawyers Say,” USA Today, Sept. 27, 2010; Ariana Eunjung Cha, “OneWest Bank Employee: Not More Than 30 Seconds’ to Sign Each Foreclosure Document,” Washington Post, Sept. 30, 2010).
In the instant action, Ms. Johnson-Seck claims to be: a Vice President of MERS in the March 16, 2009 MERS to INDYMAC assignment; a Vice President of INDYMAC in the May 14, 2009 INDYMAC to ONEWEST assignment; and, a Vice President of ONEWEST in her June 30, 2009-affidavit of merit. Ms. Johnson-Seck must explain to the Court, in her affidavit: her employment history for the past three years; and, why a conflict of interest does not exist in the instant action with her acting as a Vice President of assignor MERS, a Vice President of assignee/assignor INDYMAC, and a Vice President of assignee/plaintiff ONEWEST. Further, Ms. Johnson-Seck must explain: why she was a Vice President of both assignor MERS and assignee DEUTSCHE BANK in a second case before me, Deutsche Bank v Maraj, 18 Misc 3d 1123 (A) (Sup Ct, Kings County 2008); why she was a Vice President of both assignor MERS and assignee INDYMAC in a third case before me, Indymac Bank, FSB, v Bethley, 22 Misc 3d 1119 (A) (Sup Ct, Kings County 2009); and, why she executed an affidavit of merit as a Vice President of DEUTSCHE BANK in a fourth case before me, Deutsche Bank v Harris (Sup Ct, Kings County, Feb. 5, 2008, Index No. 35549/07).
There are even more reasons that this is sus than Judge Schack bothers to mention. Johnson-Seck miraculously becomes a vice president of IndyMac, a bank which failed in early August 2008, in August 2009. IndyMac no longer has corporate officers making routine business decisions; it is in the hands of a bankruptcy trustee. Even if the multiple roles played by Johnson-Seck were not already implausible, her being authorized to act on behalf on IndyMac in May 2009 is an impossibility (indeed, in the ruling, Schack cites testimony of Johnson-Seck in which she claims she worked for IndyMac, but joined OneWest on March 19, 2009). Furthermore, for any assets to be conveyed from IndyMac, which is what this paper trail indicates was done, would require the consent of the bankruptcy trustee. Given the informality of the Johnson-Seck operation, it’s certain this did not happen. In addition, bankruptcy trustees for dead subprime originators have reportedly not take kindly to the idea that borrower promissory notes are being conveyed away without their approval.
If you read the full decision, it sheds an unflattering light on MERS and on the activities of Lender Processing Services.
Judge Schack has been particularly diligent; in this case, since the borrower did not have an attorney. But rulings like this one give homeowners and their attorneys a road map as to how to challenge foreclosure actions. Admittedly, many judges will not be sympathetic, but if only a significant minority are perturbed, it will make life miserable for servicers and trustees.
“the pooing and servicing agreement.”
Ah! The poetry of typos!
“the pooing and servicing agreement.”
looks more like a lapsus to me…
My saving grace is that there is always someone more pedantic than I am.
It boggles the legal mind to think that “competent counsel” ever thought this tissue of lies would withstand judicial scrutiny. Or, as Judge Schack pointed out: “why a conflict of interest does not exist in the instant action with her [the robo-signer] acting as a Vice President of assignor MERS, a Vice President of assignee/assignor INDYMAC, and a Vice President of assignee/plaintiff ONEWEST” This is 1st year law school stuff.
You have to wonder, given all the high-priced legal talent that advised on the securitization deals, whether everybody decided to ignore advice of counsel or whether counsel was acting more like consigliere.
I think the kernel of the matter is that legal minds are running a cost/benefit analysis of this whole mess and come to the conclusion that homeowners rights should be sacrificed “for the common good” read “the survival of the financial sector” ergo, the economy at large, ergo, the very fabric of the US of A and…one gets the idea.
An example of this unstated, yet obvious mode of thinking:
To which a reader answered this:
When will ordinary people be given some consideration and decent treatment in this country?
A better comment at that blog was this one:
Francois T said: “…homeowners rights should be sacrificed “for the common good” read “the survival of the financial sector” ergo, the economy at large, ergo, the very fabric of the US of A and…one gets the idea.”
I think that cuts to the heart of the issue. In the Orwellian doublethink and Newspeak of the dominant school of economic “science”, “the survival of the financial sector” is “the common good.”
WAR IS PEACE
FREEDOM IS SLAVERY
IGNORANCE IS STRENGTH
Winston sank his arms to his sides and slowly refilled his lungs with air. His mind slid away into the labyrinthine world of doublethink. To know and not to know, to be conscious of complete truthfulness while telling carefully constructed lies, to hold simultaneously two opinions which canceled out, knowing them to be contradictory and believing in both of them, to use logic against logic, to repudiate morality in while laying claim to it, to believe that democracy was impossible and that the Party was the guardian of democracy, to forget whatever it was necessary to forget, then to draw it back into memory again at the moment when it was needed, and then promptly to forget it again, and above all, to apply the same process to the process itself—-that was the ultimate subtlety: consciously to induce unconsciousness, and then, once again, to become unconscious of the act of hypnosis you had just performed. Even to understand the word “doublethink” involved the use of doublethink.
The purpose of Newspeak was not only to provide a medium of expression for the world-view and mental habits proper to the devotees of Ingsoc, but to make all other modes of thought impossible. It was intended that when Newspeak had been adopted once and for all and Oldspeak forgotten, a heretical thought—-that is, a thought diverging from the principles of Ingsoc—-should be literally unthinkable, at least so far as thought is dependent on words. Its vocabulary was so constructed as to give exact and often very subtle expression to every meaning that a Party member could properly wish to express, while excluding all other meanings and also the possibility of arriving at them by indirect methods. This was done partly be the invention of new words, but chiefly by eliminating undesirable words and by stripping such words as remained of unorthodox meanings, and so far as possible all secondary meanings whatever… Newspeak was designed not to extend but to diminish the range of thought…
–George Orwell, 1984
They were counting on widespread judicial corruption, basically for all judges to act like those in the Florida kangaroo courts were specifically adjured to act.
Consigliere was and is exactly the conscious role these lawyers play, with the only difference being that they probably usually cover their own liability tracks with the kind of caveats Yves cites, “my opinion is based on your doing” this and that…, even though he knows the banksters aren’t in fact doing this and that.
Dean Baker proposes a moratorium where the homeowner pays the Fair Market Rent. This would avoid vacant houses, disposesd families, devastated communities, and the destruction of habitable but unoccupied housing. It would also help stabilized the economy.
“Private property”? What are we talking about after Tarp, Talf, FDIC guarantees, Fed backing of commercial paper, quantitative easing…up to trillions of dollars? And bonuses based on phoney accounting? And hedge fund managers taxed at the capital gains rate?
Dean Baker proposes a moratorium where the homeowner pays the Fair Market Rent. Paul P
I propose that since the bankers drove the country into unservicable debt with credit from-thin-air that the US Treasury bailout the entire population (both borrowers and savers) with real debt and interest free money from-thin-air, United States Notes, COMBINED with leverage restrictions on the banks to compensate for the new high powered money.
Bankers aren’t the only folks who can screw with money creation and its about time they get a taste of their own medicine. Note however, that even the banks would be fixed in nominal terms. Not just justice but poetic justice.
Bring on the cries of “Inflation!” even though there shouldn’t be much and that the victims of it would be the villains for a change.
Good post. While we are going to see many lower court decisions like this one, at the appeals court level the lender/note holder will win. The bigger issue for me remains what these foreclosures are doing to the property tax base. While I am saddened to see people lose their homes, a foreclosure is an opportunity for somebody else. We need to move this process along for borrowers who are truly in default and cannot cure their financial problems. Otherwise our cities, counties and states will be collapsing financially along with the TBTF banks.
“We need to move this process along for borrowers who are truly in default and cannot cure their financial problems. Otherwise our cities, counties and states will be collapsing financially along with the TBTF banks.”
Even if it means dispensing with due process and the rule of law? This sounds entirely too much like disaster capitalism to me.
The point of this exercise is that the plaintiff in these proceedings *may not be* the note holder. It would be like if I (as Anon Reader Bank, Inc) were to try to initiate a foreclosure on Tim Geitner. I can bring to the courts documents that Tim has a mortgage and documents that show Tim has not paid me the mortgage amount. Nevermind the fact Anon Reader Bank, Inc doesn’t exist, nor hold Tim’s mortgage.
Here is a quick solution to the entire problem. The Treasury can send every individual who paid taxes during the past 5 years a check for $1 million. Corporations do not receive anything. This will permit all the mortgages to be satified. Housing prices will go up. The Fed can retire its mortage holdings. Consumers will resume spending. The real economy will boom. Those concerned about inflation can end our military adventures. The Fed can stop providing free money to the banks.
We have roughly 100 million taxpayers, so the “cost” will be limited to $100,000,000,000,000. I believe that is $100 trillion.
It would be nice to add another billion or so for prosecuting the criminals responsible for this mess: originators, dealers, bankers, lawyers, regulators, Phil and Wendy, etc. Fine them each $5 million and give them ten years under RICO. The prosecutions should pay for themselves.
This will also solve the securitization problem since nobody will ever need a mortgage again.
Of course, I think they did something similar to this in Russia, and seven people ended up with all the money, proving that no solution is perfect.
Of course, I think they did something similar to this in Russia, and seven people ended up with all the money, proving that no solution is perfect. jake chase
Mock away. As this crisis deepens, a bailout of the population will seem more and more reasonable. The bankers themselves may lobby for it since it will save their balance sheets in nominal terms and perhaps their hides in real terms.
And besides a just bailout, I advocate genuine capitalism which would involve separate government and private money supplies. No longer would the counterfeiting cartel be able to use the legal tender laws to steal from the population.
Just because the Commies could not find a solution for pseudo-capitalism (fascism) does not mean it does not exist.
The Treasury can send every individual who paid taxes during the past 5 years a check for $1 million. jake chase
The government backed counterfeiting cartel cheats all money holders whether they paid taxes or not. As for the amount necessary to pay all mortgages (on average) down to current market prices, I don’t know.
But since you mock at minimal justice, I can see how a COMPLETE bailout of the population, completely eliminating their debt (and compensating savers for years of suppressed interest rates) TIMES from 2-7 (the Biblical penalty for theft) is also morally justified.
That could certainly bring on price inflation even with 100% reserve banking. But the important thing about inflation is who benefits by it. What does a person care if prices double if he has four times as much money? And with 100% reserve lending then the price spike would be a one-time occurrence since the bankers could not longer create money.
Yes, the bankers are sneaky bastards pitting savers against borrowers and trying to maintain their inflation monopoly but the problems they have created are not insolvable.
Justice? You expect justice in a situation involving tens of thousands of financial criminals, confidence men, including top executives at all leading banks and corporations, virtually every Senator, Congressman, regulator, bureaucrat, newspaper editor, economist, have I missed anybody? Can anybody rationally suggest that this mountain of mortgage debt can ever be serviced, or liquidated without destroying the economy? You think this can be papered over by commodity inflation? You think these clowns can even pretend their way out for another year? How long do you think they can make the unemployed and small savers the only casualties? This mortgage fiasco will inevitably create financial armageddon unless inflation bails out the debtors.
This mortgage fiasco will inevitably create financial armageddon unless inflation bails out the debtors. jake chase
What I propose would bail out EVERYONE in nominal terms. The losers in real terms would be the uber-rich; those who have benefited from the government backed counterfeiting cartel. An immediate reversal of decades of unjust wealth distribution would occur.
As for punishing the crooks, our entire money system is crooked from the ground up. It is inherently dishonest and unstable. Virtually everyone is a victim of it.
Throwing a few or many scapegoats under the bus won’t fix the system or restore our economy.
I thought I more or less suggested that. $1 million per taxpayer covers pretty much everyone. Where do you disagree?
“In addition, bankruptcy trustees for dead subprime originators have reportedly not take kindly to the idea that borrower promissory notes are being conveyed away without their approval.”
In the real world, isn’t this called “stealing”?
Stealing indeed! But once you have a couple mil you get to purchase the justice of the rich. The real world is so “for little people” (like me, I suffer for my sins) so sign up for your million with F. Beard!
The ramifications of ignoring centuries of common law settling real property transactions is unarguably the single largest casualty of this process, if the courts decide to ignore all precedent in favor of finance. Finance in an orderly market system does not exist without settled real property law. You destroy the philosophical basis for real property ownership, you destroy the system itself. This is the threshold of chaos: that it – however slowly- dawns on the PEOPLE that the rules are gone.
At the most basic level, why did the banks bother to have robo-signers? They skipped every other step, so why did they feel they needed a human signature?
When the class action suits reach the Supreme Court, it will be interesting to see what the pro-business, right-wingers decide.
Rodger Malcolm Mitchell
It’s possible that robots have already infiltrated the Suprement Court and it will rule in favor of robot-signing.
I thought I more or less suggested that. $1 million per taxpayer covers pretty much everyone. Where do you disagree? jake chase
That sounds conveniently too round. The total bailout should be at least be as big as M1 if we wish to replace all the credit with real legal tender.
Wes should err on the side of generosity to preclude deflation with a 100% reserve requirement.
I haven’t looked at the numbers since it doesn’t matter what they are; we are just dealing with government fiat which can be created in any amount necessary.
Forget the respective rights of the homeowner and the lender. The thing that concerns me is the title. There are a lot of properties where the title is not clear and is subject to litig
ation from investors, former homeowners, and subsequent purchasers. What an effing mess simply because the real estate industry did things on the cheap.
Banks lose one case and the foreclosure machine comes to a stand still. This exactly what is happening.