Quelle Surprise! The Banks Lied and Robosigning Lives!

We’ve heard numerous bank executives swear piously before Congressional hearings that those “paperwork problems” that led major servicers to halt or slow foreclosures on a widespread basis last year were “mistakes”. That was already a really big lies, since “mistake” means the practice was not deliberate and was presumably isolated, when in fact robosigning was a widespread, institutionalized practice.

14 major servicers then swore in consent orders earlier this year that they’d stop doing all that bad stuff. But with compliance weak (the banks get to hire the overseers!), they appear to have decided they don’t need to change their ways all that much. Indeed, the record of consent orders is underwhelming; for instance, both Nevada and Arizona are suing Countrywide for violations of past agreements.

Two stories were published yesterday, one a long form Reuters investigation (hat tip April Charney), the other a shorter report by AP (hat tip Lisa Epstein and Daniel Pennell). First from Reuters:

Reuters has found that some of the biggest U.S. banks and other “loan servicers” continue to file questionable foreclosure documents with courts and county clerks. They are using tactics that late last year triggered an outcry, multiple investigations and temporary moratoriums on foreclosures.

In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts.

Reuters also identified at least six “robosigners,” individuals who in recent months have each signed thousands of mortgage assignments — legal documents which pinpoint ownership of a property. These same individuals have been identified — in depositions, court testimony or court rulings — as previously having signed vast numbers of foreclosure documents that they never read or checked.

So…the banks have perjured themselves, made commitment to regulators that they are brazenly violating. The Reuters investigation determined that at least 5 of the 14 servicers that signed consent decrees in April are not complying with their requirements: OneWest, Bank of America, HSBC, Bank USA, Wells Fargo and GMAC Mortgage. Note that three of them (Bank of America, Wells, and GMAC, now Ally) are among the five biggest servicers, so the impact is greater than the number of derelicts suggests. And one is the annoyingly pious Wells, which keeps maintaining, contrary to all evidence, that it is better than the other servicers. In addition, another six servicers that did not sign the consent orders were also found by the Reuters exam to have engaged in abusive practices.

The AP report found that servicers were continuing to generate documents signed by well-known robosigners, including the notorious Linda Greene. This seems to be asking to be caught out.

And this isn’t just robosigning; notice that the Reuters article mentions document fabrication. The prevalence of continuing inability (or unwillingness) to comply also calls one of the provisions of the so-called Bank of America mortgage settlement into question (the one in which the Charlotte bank hopes to buy a big “get out of liability” card for a mere $8.5 billion). One of the key provisions is to move delinquent borrowers over to subservicers. Given the continuing level of misconduct in the servicing industry, it remains an open question as to whether BofA could find enough servicing capacity in clean operators to handle its volume (of course, I am foolishly assuming that the purpose of this exercise is to improve performance, as opposed to merely con investors into believing that Something Has Been Done).

Remarkably, the head of the industry lobbying group admits this is happening and offers a weak defense:

One of the industry ’s top representatives admits that the federal settlements haven’t put a stop to questionable practices.

Some loan servicers “continue to cut corners,” said David Stevens, president of the Mortgage Bankers Association. Nearly all borrowers facing foreclosure are delinquent, he said, but “the real question is whether the servicer complied with all legal requirements.” The loss of a home is “the most critical time in a family’s life,” and if foreclosure paperwork is faulty homeowners should contest it. “Families should be using every opportunity they can to protect their rights.”

This commentary is an interesting shift in stance. The MBA chief still tries to justify the abuse of legal procedures and contractual requirements as “cutting corners” against people who are really undeserving (they were delinquent anyhow, right?). The problem, which does not get the press it deserves, is that many foreclosures are servicer driven. One or two late payments (and they may not even have been late; servicers have been found to hold checks to make them late or simply be dilatory about processing payments) can quickly compound into a foreclosure due to impermissible but nevertheless common misapplication of payments and junk fees. Borrower attorneys as of last year estimated that 50% to 70% of the parties that fought foreclosures were victims of servicer fee abuses (the problem is it is very costly to contest foreclosures on that basis; it’s generally easier to go after standing). Yet for the MBA to concede that borrowers should fight foreclosures if the mortgage transfers were botched is a major change in posture.

The Reuters report begs an additional question: why has no Federal regulator done the sort of review the journalists undertook? As they describe it:

Reuters reviewed records of individual county clerk offices in five states -– Florida, Massachusetts, New York, and North and South Carolina -– with searchable online databases. Reuters also examined hundreds of documents from court case files, some obtained online and others provided by attorneys.

The searches found more than 1,000mortgage assignments that for multiple reasons appear questionable: promissory notes missing required endorsements or bearing faulty ones; and “complaints” (the legal documents that launch foreclosure suits) that appear to contain multiple incorrect facts.

By contrast, 11 Federal agencies, which have vastly greater access to bank records, were satisfied to look at a mere 2800 loan files, only roughy 100 of which were foreclosures. Predictably the review found pretty much no foreclosures to be unwarranted. This wasn’t merely a dereliction of duty; it was a cover-up.

The more serious point here is the banks actually probably do want to clean up the documents. So why haven’t they done so? Clearly the costs for some, potentially most, cases are too high relative what they deem reasonable to pay. Tom Adams has estimated that the additional costs per foreclosure are probably in the $20,000 to $40,000 range. While those numbers may seem incredible, they make the banks’ failure to comply make sense. While those charges in theory should come from the investors (!) the banks may either be having trouble procedurally making the changes (as in they may need to find completely new attorneys, a major undertaking) or may worry about wakening the heretofore sleeping giant of investors, since if they chose to go after chain of title issues, they could blow up the entire mortgage industrial complex.

But why should we expect anything different? The regulators are clearing willing at most to inconvenience the banks at the margin. Given how deep seated mortgage problems are, that means they will try to do anything but deal with the problem squarely for as long as they possibly can.

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  1. chancery

    Slightly off-topic, for the last few days I haven’t been able to log on to stopforeclosurefraud.com, the dinSFL’s site which has become my daily source for the latest court decisions.

    I’ve encountered a variety of error messages, a period when the site looked OK but the latest post was several weeks old, and for the last day or so, a “default” page suggesting that the server has been misconfigured, etc.

    Has anyone else had the same problem?

    1. Woody

      I just tried to go to the stopforeclosurefraud.com site and got the same error message.

        1. chancery

          I believe that 4closurefraud.org and stopforeclosurefraud.com are separate sites run by different people, even though, naturally enough, there’s a fair amount of overlapping content.

        2. Yves Smith Post author

          ZH cross posts from 4closurefraud.org, which is an independent site.

          NC has nothing to do with ZH.

    2. DanJS

      I’ve noticed the same problems on stopforeclosurefraud.com for 4 days….. We they targeted by any suit or agency… or could this be the result of website hacking?

      1. chancery

        stopforeclosurefraud.com seems to be back online without error messages, but the most recent posts are from nearly two weeks ago.

        Does anyone else have any suggestions for sources of current decisions on this issue? For instance, I’m curious to know what happened in the sanctions case before Judge Schack, HSBC v. Taher. I gather that Dorner didn’t appear in person, but I’d like to know whether she and HSBC submitted papers. As far as I can tell, it’s not an electronic filing case, and the information available on the NY ecourts system is limited.

  2. Non Est Factum

    The robosigning is just the tip of the iceberg, if we go back in time to the alleged closing…etc
    (Regulator too, is a misnomer, has been for years.)
    How many folks have had their homes stolen for free by Banks?
    If those people would simply attack with everything they have we could go a long way towards restoring sensibility within the owner, ruler, media-marketing complex. It’s time the Banks died.

  3. brett

    I saw yesterday in full page ads in the print edition of the FT and the Journal that objections to the proposed consent settlement order need to be filed by August 30th and there is a hearing scheduled for November 17th. I thought you would be interested to know.

    1. Yves Smith Post author

      Thanks, but we mentioned the dates in previous posts on the BofA settlement.

  4. Nitpicker

    It’s Linda Green, not Lisa Greene, and it “raises a question” not “begs a question” which has a very specific meaning not intended here.

    1. Yves Smith Post author

      Will correct the Greene error, thanks.

      As for “begs the question” it has now become popular usage. You’ll find it employed the way I used it in the New York Times, considered the arbiter of American style.

      Language is not static. The meaning of words and expressions changes over time. “Sophisticated” once meant flashy and tawdry, for instance. Split infinitives were also once considered a complete no-no, they now are considered to be acceptable.

      1. hermanas

        Beautiful work Yves,
        how about, “”illuminates” the question: why has no Federal regulator done the sort of review the journalists undertook?”

        1. hermanas

          Do you need a F.O.I.A. to get an answer as to why ” has no Federal regulator done the sort of review the journalists undertook?”

      2. Anonymous Jones

        You are quite correct that language is not static and is merely an ever-changing tool (and often, a crude one) used for human communication.

        That said, “beg the question” once had a very specific meaning, without a reasonable alternative in English, and I for one (even being the “defeatist” I’m always accused of being on this site) would like to fight for the life of this phrase. Yes, I know I’ll probably lose, but still, challenges are a big part of what makes life worth living, IMO.

        And quelle horreur, judging yourself against the standard of the NYT! Shocking. (sarcasm)

        1. watercarrier4diogenes

          Ummm, sorry, ‘Anonymous’, but (sarcasm) has been replaced by /snark…


  5. Guy Baker

    Yves, what is the biggest of the potential liabilities the $8.5b pass would get the mortgage servicers out of? I think it is the issue of faulty securitization or lack of securitization. While regulators seem eager to sweep all dirt under worn out carpet, what are the chances that the banks will be pressured into picking the odd man out and making one bank take the heat for what many did (which is to steal taxpayer money by abusing REMIC status and steal investor money by not actually securitizing the mortgages and then use the funds to make fake docs to use in foreclosures.)? The servicers are still using robosigned docs because they can’t come up with the real ones because they don’t exist. Plus they believe they will not face serious consequences.

    1. Procopius

      The servicers wouldn’t be on the hook for the failure to properly convey the notes in the securitization process, would they? I would think that would be the investment banks who created the “securities” and sold them with false assurances. I don’t think they really face any blow-back, because I’m pretty sure the courts would hold that their guarantees would be regarded as “mere commercial puffery.” The servicers, on the other hand, are probably guilty of forgery and frauds upon the court, which they might get a slap on the wrist for. Of course they will argue that they can’t fix the problem with the failure to transfer the notes because they don’t have the original notes but they’ve been collecting payments and disbursing some of the proceeds to the investors who bought the securities, which shows their good faith, so they should be allowed to make forged notes to “correct the minor technical errors.”

  6. keepon

    “One of the key provisions is to move delinquent borrowers over to subservicers. Given the continuing level of misconduct in the servicing industry, it remains an open question as to whether BofA could find enough servicing capacity in clean operators to handle its volume (of course, I am foolishly assuming that the purpose of this exercise is to improve performance, as opposed to merely con investors into believing that Something Has Been Done).”

    Or, are they moving delinquencies to ‘subservicers’to avoid the OCC mandatory ‘independent consultants’investigations of those banks as they agreed to submit to in the Consent Orders?

  7. Corn Tortilla

    ” ‘Scuse me while I whip this out” – Cleavon Little

    “The bankers and swindlers who trashed the global economy and wiped out some $40 trillion in wealth amass obscene amounts of money, much of it provided by taxpayers. They do not go to jail. Regulatory agencies, compliant to the demands of corporations.” – Chris Hedges

  8. keepon

    Re: stopforeclosurefraud

    Me too! All kinds of error messages for 2-3 days now. A MAjor checkpoint for me too numerous times daily.

    “THEY’re” not hacking our resources are THEY? It wouldn’t be the 1st attempt to mess with the Little Peoples’ resources (i.e. Szymoniak, Livinglies, Asbury) who all taken ‘odd (strange) hits’ for keeping us informed since ‘keepin’ ’em honest’ mainstream press has failed us so profoundly.

  9. Senka

    I would like to share with you my experience with our “The American Dream” meeting this past Sunday. I’ve organized the meeting hoping that at least five people will show up and we had 26 attendees and 10 more that had registered, but were not able to attend! Register O’Brien and his First Assistant were there doing a wonderful presentation about MERS, robosigning and mortgage securitization. For most attendees this was the first encounter with an enormous fraud that had been perpetrated on all of us – http://tinyurl.com/3qsu87x

  10. Monica MERS Executive

    ‘Thus, the trend among corporations with something to hide is to use intellectual property as their shield. ‘

  11. Monica MERS Executive

    ‘Thus, the trend among corporations with something to hide is to use intellectual property as their shield. ‘ -Andy Oram, ’00

  12. chris

    I am not surprised by the banks. What I am surprised by is how they are getting away with all the lies and fraud. I keep hoping someone will stand up and tell the truth but seems anyone with the right idea is being moved out or resigning.

    1. Cedric Regula

      Seems we may have to conclude they have no other way to do foreclosures besides robo signing fake docs.

      1. Skippy

        I’m sure you know, that in some cultures, that there is no state of rape, no state of theft, zero state of social responsibility, for the mouths of their gods, personified or arbitrary.

        Skippy…Banks create reality in our fiat debt paradigm, as the creator, it was theirs from the start, the rest is just Calvin Ball for the sheeple.

        PS. do you have a spare bucket?

  13. Clark

    I’ve been reading this site for a long time now. It’s invaluable. I do wonder, however, why people in general don’t seem to care. Sure, there are articles occasionally in the NYT, etc., about the rampant fraud, but it hasn’t reached escape velocity into the public consciousness, even though the victims of this fraudulent/criminal BS are legion. The “regulators” are deliberately not doing their jobs for obvious reasons. When will this end? We are having our substance eaten out by predatory psychopaths, with the active collusion of every elite power in the land. I get the sense that the TBTFs and the pols who support them are laughing at us.

  14. Abigail Field

    Hi Yves

    I’ve just launched my own blog, Reality Check, at abigailcfield.com. Please check it out; one of my first posts, on New Century, you might find interesting.

    Generally the blog will have three focuses: 1) continuing to report on and expose foreclosure fraud and all things related to it. 2) trying to mobilize direct political action 3) public policy topics I find really important other than all things foreclosure fraud.

    Thanks for all you do

  15. John Larkin

    Just a nitpick: when you say “beg” the question what you really mean is “raise” the question. Begging the question is a special phrase that refers to a circular argument or assuming what you were hoping to prove.

Comments are closed.