Whistleblower: Wells Fargo Fabricated and Altered Mortgage Documents on a Mass Basis

Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.

The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.

Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.

A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.

A team of roughly 100 temps divided across two shifts would review borrower notes (the IOU) to see whether they met a set of requirements the bank set up. Any that did not pass (and notes in securitized trusts were almost always failed) went to another unit in the same facility. They would later come back to the review team to check if the fixes and fabrications had been done correctly.

Not only is having Wells Fargo tamper with documents in this way dubious in many cases (more detail on that shortly), but amusingly, the bank does not even appear to be terribly competent at this sort of falsification. The bank changed procedures frequently, and did not go back to redo its prior work. In addition, it regularly took loans that appear to have been endorsed properly and changed them as well. Finally, even if the procedures had been proper, the temps were required to meet such aggressive production timetables and were so laxly supervised that it seems unlikely that their work was done well.

This account confirms what foreclosure defense attorneys have reported for some time: that servicers have been engaging in document fabrication for some time. It’s not uncommon for a servicer or foreclosure mill to present “tah dah” documents that miraculously remedy the problems that homeowner attorneys have raised, sometimes resulting in clear proof of fabrication, like two different notes (borrower IOUs) having been presented to the court, each supposedly an original.

But what is striking about this practice is both the brazenness and the scale. Our source was told that Wells Fargo added a second shift to its mortgage review operation in November 2011 [update: it is likely the related doctoring activities were increased correspondingly]; he* did not know when it had been established. Bank employees claimed that some of these operations had formerly been done by outside firms and the cost of doing it in-house was much lower than the cost of doing it externally. Apparently having plausible deniability was too expensive.

We sought comment from Wells Fargo on these allegations and they declined to respond.

Description of Mortgage Doctoring Operations

The document fixing took place at 1000 Blue Gentian Road in Eagan, Minnesota, which the whistleblower described as an enormous facility, and ironically, one at which one of the 9/11 hijackers received flight training.

The whistleblower worked with a team of 50-60 temps, one of the two shifts involved in checking documents before and after the “corrections” were made. The temps came via agencies, were required to have a college degree and pass a security clearance, and were paid roughly $13.00 to $14.50 an hour for eight hours (seven hours of work + breaks). The whistleblower said very few people (under 20%) had prior experience with mortgage documentation. Since Wells has a long-standing practice of promoting temps into permanent positions, the workers had a strong incentive to perform well. Our source worked for the bank for nine months.

His unit would review mortgage documents of borrowers who were described as “in foreclosure” which he understood in practice meant they were delinquent but the foreclosure has not not been initiated. When our source arrived (spring 2012), they were in the process of doubling the work capacity of this effort. Wells Fargo beefed up in the wake of the state attorney general/Federal mortgage settlement of early 2012, evidently seeing it as a green light for more aggressive and systematic document fixing.

This team had two tasks. The first was to review documents that were delivered periodically (often daily) to make sure they were in order. The part we’ll focus on is that they would check the notes to see if the endorsements matched up against what the bank wanted them to look like. (Regular readers of this blog will recall that mortgage notes are endorsed to convey ownership, and in foreclosures, attorneys often challenge the foreclosure if the borrower note does not show a complete and unbroken chain of endorsements to the party initiating the foreclosure). The whistleblower estimated that 99.5% of the notes that he reviewed that had been securitized failed the bank’s tests, and roughly 10% to 15% of the bank owned mortgages were tagged as “fails”.

Mortgage notes that failed this review were sent to a neighboring section. Weeks later, they would come back to the same section with the corrections made, either in the form of new endorsements made to the note, or the addition of an allonge. An allonge is a separate piece of paper, attached (“affixed”) to a negotiable instrument so that more signatures can be added. They were virtually unheard of prior to the robosigining scandal, since in the normal course of business, there would be no reason to use an allonge (the margins and back of a note can be used for signatures). The people in his unit were then to check that this doctoring had been done correctly.

The work environment had a peculiar combination of regimentation and chaos. The temps were given instructions that kept changing and were inconsistent over time (and remember, this worker joined after the state/Federal mortgage settlement was final):

This was a document processing facility where we would go through the files that were already in the foreclosure pipeline, as decided by somebody else, so we would kind of source and classify each file according to, you know, various criteria. First of all, just make sure they’ve got all the parts, like the note and the mortgage and the title policy, and if they’ve got all those and they matched, then see if they’ve got the right information on them, the priority being on the, you know, the final endorsement on the note…

One of the points I was going to make was, when we originally started, the protocol was very distinct for one as opposed to the other. And then rapidly states were passing laws, is what we were told, to change it, so that the number of OD {original document] states being fewer and fewer. Then after the second and third decree there was no distinction anymore. And it seemed like we were supposed to have original documents for everything at that point. So actually a lot of my impression is that there were several things that were a little strange that changed as some of these decrees went through. So like, that’s the second one I was going to mention, is when we were first trained, the way that you treated a standard loan file and a securitized loan file were very, very different, and there was a fairly strict protocol. You had to have a continuous chain of endorsement, had to have a final endorsement to Wells Fargo or one of its affiliates, for a note to pass. But, if it was securitized, you went to this LPS database called CPI, and there would be a list of, you know, however many people had once claimed to own this file, this note. And all of a sudden the continuous chain of endorsement rule went away and you didn’t necessarily use the last one, you would just pick one out of the list that matches your last endorsement and that was good enough.

You can see how irregular this procedure was. Notice how the bank went from having the view that fewer and fewer states required a review and correction of original documents, then reversing itself and deciding all did.

Similalry, if the temps were instructed to match a note to any listed party they could find on a Lender Processing Services database (which relies on manually input data and is thus not reliable), and it was not the final party, that means they are constructing a chain of title that is at odds with the bank’s own touted system of records. If the bank were serious about even getting its fixes right, for securitized loans, it would go to the pooling & servicing agreement and see what it stipulated as the chain of title and work from there. [Update: our source clarified upon seeing the post that once the were given only actual mortgage notes to work with, they were instructed to look for a complete chain of endorsements. That’s an improvement over the previous process, but not necessarily sufficient. This is now playing on the lack of patience of judges in understanding how elaborately lawyered-up securitizations were supposed to work. A complete-looking chain might not be the proper or complete conveyance chain as set forth in the relevant PSA. This is basically looking to see if the documents look internally plausible enough to pass muster with most judges, rather than doing it correctly].

It is important to point out that it perfectly OK for the bank to transfer notes it owns (loans owned by Wells Fargo entities, including banks it acquired) any time it wants to prior to foreclosure. Where this gets dodgy is on the securitized loans. These loans were supposed to have been transferred to the securitization trust, through a series of intermediary parties, with a complete and unbroken chain of endorsements on each borrower note. These transfers were to have been completed by a specified cut-off date, with a limited period of time after that for any document clean-up. The trustees on these deals provided multiple certifications to the effect that they had the notes in good order (which would mean the trust properly owned them, that is, all the transfers had been completed as reflected, among other things, in the note being endorsed correctly).

The fact that Wells Fargo is dorking with documents on a mass basis at this late state is an indication of how little of the work that the mortgage industrial complex has kept insisting was done correctly was done at all.

And this was a high-volume operation. Back to our source:

There was a big board that would have inventory in and out for each shift on each day, but that is a little fuzzy. My recollection is that we could move anywhere between 5,000 and 11,000 files a day. A really slow day would be 3,000 for our shift and people might have to go home early. That happened a couple days a week for several weeks the last few months I was there. We generally measured the shift inventory in bins. We would have just a few bins on a slow day, but on a typical busy day there would be 25 to 35 bins full of files to go through.

I’m getting fuzzy on what our hourly targets were. For electronic files I believe we were supposed to do at least 35 or more an hour. I also remember the number 55. I can’t remember if that was a target or not. With paper files I believe we were supposed to do at least 25 an hour, although after two or three months there wasn’t so much discussion of volume and the focus was mostly on accuracy. There were many who did more than this.

These targets don’t seem to square with the daily final tallies I remember people putting in which ranged from 45-130 per person per shift. There were people who would double the target and people who were fairly below it.

Let’s take the midpoint of his 45-130 files a shift range, which is 87.5. They worked 7 hour per shift. That’s under 5 minutes a file. That is to check not only that all the basic documents were there, but also to go into the CPI database, and possibly also into a backup spread sheet if the desired information was not in CPI, and look for a match.

The objective was to have the final endorsement be “to blank” or what is more typically described as “in blank”. The whsileblower gave this example of how a note was supposed to look once it was corrected:

I was checking to see if whoever had written out the new endorsements really had copied what was in CPI word for word, letter for letter. After checking the first couple with increased scrutiny, it became clear that they had copied them absolutely verbatim, only in a new endorsement to blank.

Before it would be:

Pay to the Order of

Bear Stearns Trust, Pass through certificate holders 2003, VII.

Without Recourse
U.S. Bank

Joe Blow,
Vice President, U.S. Bank

According to our training, that would be an incomplete and therefore invalid endorsement as the
chain did not end with the final noteholder endorsing it to blank.

In order to remedy that, they would add an additional endorsement:

Pay to the Order of

Without Recourse
Bear Stearns Trust, Pass through certificate holders 2003, VII.

Billy Cobham
Vice President, Wells Fargo
By power of attorney

In this way, the note endorsed to the trust and stopping (an incomplete chain as I was taught at Wells) would be modified into a complete chain, The trust would endorse it to blank and that endorsement would be added by Wells power of attorney, I assumed, but was never directly informed, by way of its authority as servicer for the trust.

Now what is peculiar about this is that our source reports that the notes were almost always endorsed to the trust (description includes Trust Series Name, Trust Number, Year). This is not only a permissible endorsement, some legal experts think it is the only sort of final endorsement that is proper.** So Wells also appears to be expending a great deal of effort doctoring documents that may be perfectly kosher (assuming the chain of title up to the trust is unbroken, something our source was not instructed to examine).

None of the higher ups questioned the revisions to procedures:

Generally, however, the whole process was a matter of ever changing orders and flowcharts to follow. There was next to nothing in the way of explanation even if you asked. It is my impression that the work directors didn’t have the slightest idea about the bigger picture, what was going on or that there might be a problem.

And for a substantial period of time, the priority appeared to be production, not accuracy***:

They would periodically restructure the flow chart to improve productivity. There were also a group of seven or eight auditors who were hired as “team members” out of the temp pool and effectively served as managers and who even did training near the end. They were the best informed regarding the process and the most hands on. They would also be involved in fixing oversights in the process flow charts. Their primary job was auditing assigned samples of each employee’s production per week and compiling statistics on them for the managers to see. These weekly stats were released in an email every week with all employees on the shift ranked by name in terms of productivity (files per working hour), and later in terms of accuracy.

Our source stresses that the procedures became more “reasonable” over time, in terms of having more coherent internal logic and being less production-driven, but it still raises the question of the apparent failure to correct earlier documents (which were presumably used in foreclosures) and whether even the later “improved” processes were adequate or even permissible.

Troubling Legal and Practical Issues

It is not clear whether Wells Fargo could make these changes legally to private label (non-Freddie and Fannie) securitized mortgages. While our source believes that Wells may have gotten a power of attorney from the trustee to make these changes, the PSA does not appear to convey this authority to the trustee.**** And why would it? Making sure the notes were endorsed properly was something the trustee repeatedly certified it had done years ago.

A party cannot convey authority to another party that it does not possess. So these document changes may be a complete legal fail.

But even if they could be construed to be permissible, the process is clearly hugely flawed. The temps were inexperienced, and not well supervised, and under pressure to produce at unrealistic levels. They relied on a database of questionable accuracy. Procedures were changed so often and so radically that some clearly had to be wrong. And our source reports some of his colleagues waved through documents he would have failed.

So we have document doctoring on top of widespread fraud. Welcome to property rights and records in America. If you are a borrower, you have to be punctilious in living up to your contractual commitments, or you can expect to have your lender use your lapse to maximum advantage. But if you are a bank, the government and courts will cast a blind eye to virtually any error. Anyone with any sense will avoid being in debt, which will ultimately be to the detriment of commerce. But it will take the authorities a long time to recognize that their efforts to save the system rather than reform it will only weaken it further.

* We refer to all whistleblowers as male irrespective of gender.

** The overwhelming majority of mortgage securitizations elected New York for its governing law, precisely because its trust law is settled. But it is also very rigid. For a transfer to a New York trust to be valid, the assets need to be transferred to the trust, not just the trustee. However, this issue has rarely been raised in foreclosures, since it would add an large cost to hire New York trust experts to provide supporting testimony. Since pretty much all PSAs allowed for endorsement in blank, that is accepted in courts; the fight is usually over whether the chain of endorsements is complete and whether the final party is the one who is in court trying to foreclose. In fact, our source indicated: “They were almost alwaysn endorsed to a trust and then the endorsement chain would just stop there. ” So bizarrely, Wells Fargo was doctoring documents that were correct!

*** The bank apparently started emphasizing accuracy more later in 2012, but with no redo of the earlier work, this appears to (at best) be an effort to shut the gate after the horse is in the next county. And as indicated, their ideas of “accuracy” appear subject to question.

**** We contacted a securitization expert on this matter, who (not surprisingly) could not recall and did not find language in a PSA that authorized this sort of post-trust-closing endorsement. Via e-mail:

So far, this is all I could find about the trustee signing title over to the master servicer (from section 3.14 of the PSA):

Upon the occurrence of a Cash Liquidation or REO Disposition, following the deposit in the Custodial Account of all Insurance Proceeds, Liquidation Proceeds and other payments and recoveries referred to in the definition of “Cash Liquidation” or “REO Disposition,” as applicable, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee or the Custodian, as the case may be, shall release to the Master Servicer the related Custodial File and the Trustee shall execute and deliver such instruments of transfer or assignment prepared by the Master Servicer, in each case without recourse, as shall be necessary to vest in the Master Servicer or its designee, as the case may be, the related Mortgage Loan, and thereafter such Mortgage Loan shall
not be part of the Trust Fund.

But notice this section relates to a “Cash Liquidation or REO Disposition” and not in preparation for commencing a foreclosure action.

One might try arguing from Section 3.01:

The Trustee shall furnish the Master Servicer with any powers of attorney and other documents necessary or appropriate to enable the Master Servicer to service and administer the Mortgage Loans. The Trustee shall not be liable for any action taken by the Master Servicer or any Subservicer pursuant to such powers of attorney or other documents.

But again, we have a problem of legitimate authority. If the note has not been conveyed to the trust properly, altering original mortgage documents arguably does not fall in the scope of servicing and administering the mortgages. Indeed, if the notes were not conveyed to the trust by the cutoff date, they are not the property of the trust and trustee lacks authority to take action. This is precisely the scenario that no one in the mortgage industry wanted examined closely, and why they’ve gone to such lengths to pretty up document trials to indicate otherwise.

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  1. Hugh

    Massive forgeries covering massive frauds and with foreclosure massive thefts. This is kleptocracy. They did this. They do this, and they were and are abetted at every turn by complicit regulators, politicians, and judges, and importantly not the local variety but the feds. They all belong in prison, not just the banksters but all those in government who have covered for them, right up to the Obamination in chief. That the banksters were sloppy is not a sign of weakness. It rather shows they knew how much they could get away with, which was a lot. Why make a good forgery when a half-assed one will do?

    Wells Fargo is, of course, the bank that Warren Buffett has invested so much in. Buffett is the megalomaniac billionaire who was supposed to invest in only well run, as in nominally honest, enterprises. Curious that there has not been a revisiting of his reputation in light of investments like Wells Fargo.

    Stories like these and the series on BoA show why the system can not be reformed. There is no rule of law to fall back upon. Once a corporation reaches a certain size, the law no longer applies to it. It can act with impunity. It can pile crime on crime. It can use one crime to cover up or make way for another. And this is not an aberration but its business model. Such activities can not be reformed away because they infect the very institutions through which such reforms would be carried out. Perhaps it is the lateness of the hour, but this will not end in tears, as we so often say, but in blood.

    1. Cynthia

      Many are at the edge right now. If there is no justice, any individuals form of justice is good enough no matter how harsh that justice is. The ‘Revolving Door’ is a euphemism for what should be called the door of corruption. Without any action on the part of the government, the time is coming for the people to take action against the corporate and government criminals. When the worst happens, the corrupt can be sure that they and their families will certainly suffer much horrible fates than the legal system would have given them.

      1. Kevdog

        Finally someone who sais it how it should be. I agree with you Cynthia it at the breaking point now, no way for return. It amazes me how these people believe they are above the law. Soon we average Americans will be coming to take back what was stolen and there will not be a damn thing they can do about it. It shows why the Government has been buying up ammo by the boat loads, the know its on the brink. I wish this would not have came to this for my children’s sake but its time to take down the entire corrupt system, this includes all courts of lawlessness. There blind eyes will be gouged out with toothpicks and shoved up there bum hole.

      2. Nathanael

        –>Many are at the edge right now. If there is no justice, any individuals form of justice is good enough no matter how harsh that justice is.<–

        This is what I've been warning about. If the "justice" system becomes generally perceived as agents of injustice, people will take matters into their own hands *and the general populace will support them*.

        This has several possible outcomes. NONE of them include the survival of the current government, and ALL of them include the bloody deaths of many of the bank executives who committed the most egregious crimes.



      Section 806

      Protection for Employees of Publicly Traded Companies Who Provide Evidence of Fraud

      “Whistleblower Protection for Employees of Publicly Traded Companies.–No company with a class of securities registered under section 12 of the Securities Exchange Act of 1934 (15 U.S.C. 78l), or that is required to file reports under section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78o(d)), or any officer, employee, contractor, subcontractor, or agent of such company, may discharge, demote, suspend, threaten, harass, or in any other manner discriminate against an employee in the terms and conditions of employment because of any lawful act done by the employee–
      “(1) to provide information, cause information to be provided, or otherwise assist in an investigation regarding any conduct which the employee reasonably believes constitutes a violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders, when the information or assistance is provided to or the investigation is conducted by–
      “(A) a Federal regulatory or law enforcement agency;
      “(B) any Member of Congress or any committee of Congress; or
      “(C) a person with supervisory authority over the employee (or such other person working for the employer who has the authority to investigate, discover, or terminate misconduct); or
      “(2) to file, cause to be filed, testify, participate in, or otherwise assist in a proceeding filed or about to be filed (with any knowledge of the employer) relating to an alleged violation of section 1341, 1343, 1344, or 1348, any rule or regulation of the Securities and Exchange Commission, or any provision of Federal law relating to fraud against shareholders.
      “(b) Enforcement Action.–
      “(1) In general.– A person who alleges discharge or other discrimination by any person in violation of subsection (a) may seek relief under subsection (c), by–
      “(A) filing a complaint with the Secretary of Labor; or
      “(B) if the Secretary has not issued a final decision within 180 days of the filing of the complaint and there is no showing that such delay is due to the bad faith of the claimant, bringing an action at law or equity for de novo review in the appropriate district court of the United States, which shall have jurisdiction over such an action without regard to the amount in controversy.
      “(2) Procedure.—-
      “(A) In general.–An action under paragraph (1)(A) shall be governed under the rules and procedures set forth in section 42121(b) of title 49, United States Code.
      “(B) Exception.–Notification made under section 42121(b)(1) of title 49, United States Code, shall be made to the person named in the complaint and to the employer.
      “(C) Burdens of proof.–An action brought under paragraph (1)(B) shall be governed by the legal burdens of proof set forth in section 42121(b) of title 49, United States Code.
      “(D) Statute of limitations.–An action under paragraph (1) shall be commenced not later than 90 days after the date on which the violation occurs.
      “(c) Remedies.–
      “(1) In general.– An employee prevailing in any action under subsection (b)(1) shall be entitled to all relief necessary to make the employee whole.
      “(2) Compensatory damages.– Relief for any action under paragraph (1) shall include–
      “(A) reinstatement with the same seniority status that the employee would have had, but for the discrimination;
      “(B) the amount of back pay, with interest; and
      “(C) compensation for any special damages sustained as a result of the discrimination, including litigation costs, expert witness fees, and reasonable attorney fees.
      “(d) Rights Retained by Employee.–Nothing in this section shall be deemed to diminish the rights, privileges, or remedies of any employee under any Federal or State law, or under any collective bargaining agreement.”.

  2. jake chase

    Great piece! I don’t know which is more surprising, the criminality or the incompetence? If there is a systemic remedy for all this, it can only be a return to limited banking- one location per bank, Glass Steagall reinstated, a gold exchange standard to discipline the Fed.

    What to do about all these phony mortgages? The borrowers certainly got the money; somebody loaned it to them; the mortgages were recorded and ought to be considered valid liens. As to who is entitled to foreclose, I think you need federal legislation to validly establish that. You could justifiably incarcerate everybody working in a senior executive capacity at every big bank at any time during the past ten years, and prosecute all of them under RICO in a slam dunk. I haven’t really thought this through.

    Law seems to have become a delusion. Perhaps it always was a delusion. I have been telling clients for years: stay as far away from law as possible. It only works for lawyers, judges and bureaucrats. Little did I know. I thought I was cynical and it turns out I am just naive.

    1. Yves Smith Post author

      I would have much less outrage if the servicers were willing to act in good faith and give more modifications to viable borrowers. Banks did that routinely in the days when mortgages were all on the banks’ books. But you have not only banks not willing to take half a loaf (which is vastly better for investors as well as communities) but they cheat investors every way they can (double charging both the borrower and the trust, charging impermissibly high attorney’s charges [many states plus Fannie and Freddie have limits, and on top of that there is just basic smell test] that my source said the banks could not substantiate with invoices). Just to give you one idea how far this goes: they tell investors that they’ve sold a property out of REO anywhere from two months to as long as eight months after court records say the sale occurred. Why? They can keep charging servicing and other fees.

      And you assume that the borrower was genuinely behind when a foreclosure occurs. We’ve written repeatedly about servicer driven foreclosures, where either a borrower was not behind or a minor error or arrearage was compounded into a foreclosure, even as the borrower tried frantically to get catch-up payments credited properly.

      1. jake chase

        Yeah, all that is true. The borrowers who were not really delinquent, those who were subjected to improper fees, all ought to have a remedy. One of the problems with legal rights is the cost of enforcing them. The State Attorneys General ought to be persuing these issues on behalf of their constituents. Unfortunately, they are too busy running for Governor, or soliciting sweetheart sinecures after retirement from office. (You can buy a Congressman for $50,000 and I imagine an AG is even more affordable).

        Class action lawsuits normally result only in lawyer windfalls. Clients get peanuts. Our legal system simply doesn’t work. About the only thing one can do is expose it. You do a great job of that.

        1. sgt_doom

          Legal system? What effing legal system, jc????

          Each one of these constitutes a felony, no matter what that phony baloney DroneMaster Obama falsely claims (did he really attend law school, or is he simply the greatest shuck-and-jive-a** of all time????), and the sum total is thousands upon thousands, and millions of felonies — many, many banksters should go to jail, were we not saddled with a completely dishonest and crooked attorney general and DOJ and FBI and Dept. of the Treasury and president and vice-president, etc., etc., ad infinitum…..

    2. F. Beard

      If there is a systemic remedy for all this, it can only be a return to limited banking- one location per bank, Glass Steagall reinstated, a gold exchange standard to discipline the Fed. jake chase

      And repeat history one more time?!

      Banking is an inherently dishonest and unstable business. We need to allow ethical means of private money creation to replace it.

      Or not. The world has to end sometime…

      1. jake chase

        Banking is not inherently dishonest and unstable. The missing ingredient in banking today is failure. When banks can fail they must needs be operated prudently. The Fed is the biggest problem, and not one person in ten thousand understands why.

        1. Nathanael

          Banking is not inherently dishonest. It is inherently unstable.

          Traditionally, government-run banks (post office bank) were the solution to the instability problem.

    3. usedkarguy

      Jake, first point: the borrowers’ debts were essentially extinguished when the bonds were paid off with TARP. Any residual obligation is an unsecured debt collection. The funds used for mortgages were from multiple sources, not investor money (mostly secured borrowings against stock certs). Loans never delivered and accepted never reached the trustee. NY Trust law is very specific. LIBOR manipulation somehow is not recognized as the tool to force defaults. Second point: you cannot do an “ex-post facto” fix, which is what you’re suggesting.
      Yves, GREAT JOB. With three assignments of mortgage filed in the adversary, judge says that’s okay, they all went to the same party: Wells to HSBC. One assignment filed after the borrowers’ BK filing. that’s okay. “The Debtors vehemently protest the fact that no assignment was recorded until after the foreclosure proceeding was commenced. First, the timing with respect to the foreclosure case is irrelevant to the validity of HSBC’s proof of claim in this bankruptcy case.” HUH? I sure would like to depose that whistlebower! Can you help?

    4. cj holmes

      1. Original loans: the “money” for these loans was created out of thin air by the Federal Reserve – fiat credit creation. The loans were then overinsured (30x some say) and oversold (up to 23x some say – all in the fraudulent securitization process)… Remember, none of these loans was ever the banksters’ money – and as long as we allow this credit creation to exist for private pockets as it does right now – we’ll be the outsider fools, losing our hard assets and future to those with the “right” to create the money we use.

      2. It’s ALL about the money – check out a paper bill in your wallet to read what it claims to be: A Federal Reserve NOTE. that means private banksters get to create this “money” out of thin air, then force us to use it and pay them interest on it – as we would on any loan. The Fed Reserve is mainly owned by Chase and Citigroup… and 40% of our national debt IS INTEREST PAYMENTS ON THAT DEBT.

      3. When we FIX the problem by creating money without debt payments, these other crimes/corruptions will disappear. We must establish public banks where the creation of credit is for the exclusive benefit of the people and the community – not private individuals – and THEN we can take back control of our lives and assets.

      Print $16T US DOLLARS, pay off the Fed Reserve, save 40% of our budget deficit in interest payments, and voila! we have solved our fiscal cliff, and also rampant bank fraud.

  3. Mark P.

    ‘Welcome to property rights and records in America.’

    Welcome to the neofeudal moment.

    There’s a Peruvian economist, Hernando de Soto. Many of you will know of him and for those who don’t —

    Mileages will vary around here about de Soto, since he may be a Peruvian pro-capitalist, but he’s still pro-capitalist. That said, his work casts some light as regards the immense damage the mortgage-securitization ‘industry’ has done to this society.

    De Soto focuses on the importance of property and business rights. He argues that the big difference between developed and non-developed countries around the world has simply been that the former have established property rights and legal structures that provide an information framework that records ownership of property.

    Lacking those things, de Soto argues, what’s generated is a society with “two parallel economies, legal and extra legal. An elite minority enjoys the economic benefits of the law and globalization, while the majority of entrepreneurs are stuck in poverty, where their assets … languish as dead capital in the shadows of the law.”

    In such a society, many people find it difficult to impossible to obtain credit, sell their business, or expand. They cannot seek legal remedies to business conflicts in court, since they don’t have legal ownership. Lack of information on income prevents governments from collecting taxes and acting for the public welfare. Basically, it becomes a society where the majority of people cannot much monetize their assets and labor, and overall is a far less effective, poorer society.

    “Imagine a country,” De Soto has written, “where nobody can identify who owns what … resources cannot be conveniently turned into money, ownership cannot be divided into shares….”

    Neofeudalism comes to America.

    1. the idiot

      Excellent article and comments. The question keeps being asked “how will this all end.” And also, “when will people draw the line?” When will the actions of Wall St. and the corporate elite begin to have consequences? I don’t think it will happen until the pain for the lower class and what’s left of the middle class becomes so acute that it forces people into the street to hold the corporate state accountable. So its going to get much worse? How can it not.

      1. JTFaraday

        If it’s really about property rights (and a dirty financial sector), then it’s the upper middle and middle classes that should be rebelling, as this most directly damages their interests.

        I’ve said this all along, but apparently that damage is still hidden from them. Too many muppets still think their interests are aligned with the crooks.

        1. Nathanael

          The middle classes and upper middle classes are the ones whose homes are being stolen.

          (The lower classes were renters, remember.)

        2. UnderWater

          @Nathaniel Actually that may be part of the delusion. Homeowners and renters reflect all income levels. The banks and politicians have scapegoated minority homeowners while you have people in TN, GA and other low home value states also suffering from these abuses.

      2. JTFaraday

        If the poor take to the streets, this being the US they’ll ask for “jobs,” and will end up working for the crooks.

        Nope. Somebody has to force an actual change.

      3. Francois T

        “So its going to get much worse?”

        How bad did it have to become in the 30s, in the midst of the Great Depression?

        Congress got scared only when it became obvious that a Socialist Party (or any 3rd party for that matter) would be so popular that they would clean out Washington on any remnant of the bandits in place.

        But before getting there, immense pain and suffering was bestowed on the people, who, 80 years later, can’t be bothered to revisit the lessons of their own history.

        We get what we deserve, don’t we?

        1. the idiot

          Good comments all around. And I think Americans respond to authoritarianism much easier than they think. I was just in an email discussion with friend of mine about a third parties and our illusion of choice within our current two party system. He lives in California, so he has voted third party in the last several elections. I live in North Carolina, so I felt compelled to vote for Obama in a tighter race and because I was concerned about social issues. But never again. Obama says all the right things about LGBT rights, women and minorities, but I see kno evidence he cares a fig for poor or elderly LGBTs, women or minorities. My friend said even in California, where Obama hat the race wrapped up, he felt the scorn of his “progressive” friends that he was voting against Obama. And he wondered when in the future people would say, “OK,that’s enough.”

          I had to delete my reply to him, because somehow my long, meandering response ended with he and I gathering wild berries in the dystopian future while Kevin Costner tried to deliver the mail. I felt like Chris Hedges reading Tarot cards, and it sound really kind of crazy. But maybe crazy is exactly where it will end.

          I actually found Naked Capitalism through Matt Stoller and his article in Salon: The Progressive Case Against Obama. I think after we have seen progressive-sounding but neo-liberal-acting Obama the first couple of months after reelection, this article become more timely now than ever: http://www.salon.com/2012/10/27/the_progressive_case_against_obama/

          I’m sure it has been widely discussed here, and I apologize if this is all so redundant.

          1. Nathanael

            We have a sclerotic and defective political system. (Look up Duverger’s Law and party-proportional representation.) As a result, we’re seeing a scenario play out politically which is similar to the pre-Civil-War situation. Everyone knows that the major parties (Whigs and Democrats in that case) are not resolving or dealing with the issues of the day, but they keep staggering on, while societal unity falls apart.

            Eventually one of them collapsed entirely (the Whigs) and left room for a party which actually stood for something (the Republicans) — at which point the Civil War started.

      4. Crazy Horse

        If you study the history of actual revolutions the fact is that they don’t occur because things get worse for the oppressed until finally they can’t take it any more. They occur when the idea that things could be better becomes widespread and finds a way to express itself. Occasionally that may be through democracy– as in Hugo Chavez’s Bolivarian Revolution,* but more often through violence that degenerates into dictatorship.

        People living out of shopping carts drink themselves to death on cheap wine: they don’t organize a political movement or peoples army to throw off the boot on their neck. People trying desperately to hang on to the job they have don’t turn off the Brainwash Box and become revolutionary, they buy a bigger Brainwash Box on credit from Wallmart. The effectiveness,sophistication, and centralized control of propaganda in the modern era is what distinguishes it from earlier times where revolutions occurred. It is an open question whether the sheeple Orwell anticipated are not the dominant humanoid life form of the future.

        *how many of you, even in this select group of politically active people, are aware that the international team of observers headed by ex-president Carter reported that Venezuela has the freest and most democratic election system in the world? Or have you been brainwashed into believing a leader elected three times by an overwhelming majority where voters participate at twice the US rate was a brutal dictator because he demanded that his country’s oil wealth benefit his country’s 99% instead of Shell, BP, and Exon?

        1. Crazy Horse

          The point I am making is that Venezuela has a functioning democratic electoral system, not that it is some paradise on earth. One need only look at the doubling and tripling of the murder rate during the Chavez years to see that the government is failing at its responsibilities to protect the people.

          1. the idiot

            I think a lot of people here probably knew that about Ecuador’s voting system being vetted by Carter. Carter also had some kind words for the Chavez family when he heard of his death. I think Carter “got” Chavez like none of our other leaders here have.

            Your points about revolutions not occurring from pain are interesting, but I think historically there has to be a great deal of discomfort to shake people out of their safety zone. There has to be at least some degree of pain and corruption to motivate people. Now your points about people just wanting to hang on to their jobs and buy bigger TVs are probably true, for now. But when more and more people who used to have big TV’s are pushing shopping carts, then there will be a tipping point.

        2. Nathanael

          Crazy Horse: this is why the impoverishment and abuse of *college graduates* and *homeowners* is what leads to revolutions. Abuse of the already-poor and the third-generation poor doesn’t.

          1. Nathanael

            As the other person said, the revolution is generally driven be people who *grew up with* something better and had it *taken away from them*.

    2. sgt_doom

      Oh, geez Louise, dude! Please don’t cite that Wall Street and I love the Council on Foreign Relations stooge, de Soto.

      That dood is such a redirection specialist. You couldn’t do much worse than to cite him at this article posting, sonny.




    This letter is being sent pursuant to my statutory obligation to “meet and confer” with you concerning the defects before bringing an action to enjoin any future foreclosure pursuant to Civil Code § 2924.12.

    Defendant’s are in violation of both the notice and standing requirements of California law, and the California newly enacted Homeowner Bill of Rights (“HBR”). In July 2012, California enacted the Homeowner Bill of Rights (“HBR”). Among other things, the HBR authorizes private civil suits to enjoin foreclosure by entities that record or file notices of default or other documents falsely claiming the right to foreclose. Civil Code § 2923.55 requires a servicer to provide borrowers with their note and certain other documents, if the borrowers request them.

    Civil Code § 2924.17 requires any notice of default, notice of sale, assignment of deed of trust, or substitution of trustee recorded on behalf of a servicer in connection with a foreclosure, or any declaration or affidavit filed in any court regarding a foreclosure, to be “accurate and complete and supported by competent and reliable evidence.” It further requires the servicer to ensure it has reviewed competent and reliable evidence to substantiate the borrower’s default and the right to foreclose.

    Civil Code § 2924.12 authorizes actions to enjoin foreclosures, or for damages after foreclosure, for breaches of §§ 2923.55 or 2924.17. This right of private action is “in addition to and independent of any other rights, remedies, or procedures under any other law. Nothing in this section shall be construed to alter, limit, or negate any other rights, remedies, or procedures provided by law.” Civil Code § 2924.12(h).

    Any Notice of Default, or Substitution of Trustee recorded on Plaintiffs’ real property based upon a fraudulent and forged Deed of Trust shall be considered a “Material Violation”, thus triggering the injunctive relief provisions of Civil Code § 2924.12 & § 2924.17(a) (b).

    I therefore demand that Wells Fargo Bank, N.A. provide Barry Fagan with the UNALTERED original Deed of Trust along with the ORIGINAL Note, as the ones provided by Kutak Rock LLP on October 13, 2011 to Ronsin Copy Service were both photo-shopped and fraudulent fabrications of the original documents, thus not the originals as ordered to be produced by Judge Tarle under LASC case number SC112044. Attached hereto and made a part hereof is the October 13, 2011 Ronsin Copy Service Declaration with copies of the altered and photo-shopped Note and Deed of Trust concerning real property located at Roca Chica Dr. Malibu, CA 90265.

    Judge Karlan under LASC case number SC117023 “DENIED” Wells Fargo’s Request for Judicial Notice of the very same Deed of Trust, Notice of Default, Substitution of Trustee and the Notice of Rescission concerning real property located at Roca Chica Dr. Malibu, CA 90265.

    Attached hereto and made a part hereof is the relevant excerpt of Judge Karlan’s October 23, 2012 Court Order along with a copy of Wells Fargo’s Request for Judicial Notice of those very same documents. Court Order: REQUEST FOR JUDICIAL NOTICE “DEFENDANT’S REQUEST FOR JUDICIAL NOTICE IS DENIED AS TO EXHIBITS A, B, C, D, K, L, & M.”

    As a result of the above stated facts, please be advised that the fraudulently altered deed of trust and photo-shopped Note that you claim to have been previously provided to Barry Fagan shall not be considered in compliance with section 2923.55 and therefore Wells Fargo Bank, N.A. has committed a “Material Violation” under California’s Newly Enacted Homeowners Bill of Rights pursuant to Civil Code sections, 2923.55, 2924.12, and 2924.17 (a) (b).
    Please govern yourselves accordingly.

    /s/Barry Fagan
    Barry S. Fagan Esq.

    1. jake chase

      And if the bank can’t locate the original deed of trust and note, then what? Was the deed recorded?

      1. sgt_doom

        No source docs, no legal case. (Remember how there were between 2,000 to over 3,000 outstanding SEC cases against various American corporations, and since their source docs were destroyed when WTC Building 7 was “destroyed” on 9/11/01, end of those cases!

    2. monday1929

      Boy, you are a real hard-ass. Asking for unaltered and unforged documents? You might be a Terrorist.

      Wait a second……

      If you believe that there should be a “Rule of Law”, and you find an automobile when you mow your lawn, you might be a redneck terrorist.

    3. Nathanael

      Barry: you’ll need to get a forensics expert because the courts will ASSume that the forged documents are genuine unless you get an affadavit from a forensics expert explaining that yes, they are photoshopped.

  5. Clive

    I’m pretty credulous, but I simply cannot believe how the rule of law (and the protection of property rights is absolutely integral to a properly functioning society — it’s right up there with habeas corpus because if you can have doubts cast about what, exactly, you own and what you don’t own then your ability to function in life is similarly compromised) has been so wholly undermined. In “the land of the free”, “give me liberty or give me death” USA.

    We’re so lucky in the UK — I’m sure that if our property rights and court systems were not in procession of so much independence, history and precedence, then the financial services Morlocks would have similarly devoured us too. I don’t have a huge amount of such example to cite as to why I’m glad I live here but that is definitely one. I suppose in the US, you kind-of thought that maybe 200 years of legal definitions would make things pretty much “guaranteed”. Maybe when you have a thousand years of struggle under your collective belts, you’ll be able to say that with more surety.

    The worrying thing to me about all this is no-one (as in, a huge swath of society in general) seems too, well, worried, about it… Hoping I’m wrong on that one.

    1. jake chase

      I think the real problems are yet to come. What happens when an owner tries to sell a property mortgaged in the past 15 years? How does the buyer know he is getting a release of the mortgage from someone entitled to execute it? If that mortgage was securitized, nobody knows who owns it. That is why I don’t run out and buy property. You need a foreclosure to establish a seller’s legal rights.

      1. Clive

        No Jake, you’re right. It’s not as far fetched as it might sound. Some relatives of mine have just come back from a vacation in Florida and we talked about the area, its potential for coming out of the slump and its prospects (for a non-US resident, I’m looking outside in so I might have things skewed) in 5, 10 or 20 years. To cut a long story short, I’m thinking about retirement and struggling to find any asset class I have that sort of confidence in.

        Anyhow, I looked at residential real estate, primarily vacation rentals. I figured you’d always have the sunshine there. Also a large local market that isn’t necessarily dependent on cheap aviation. And prices have truly, truly cratered in Florida. Even allowing for recent GBP weakness, in both dollar and GBP terms, there seems to be some bargains creeping in.

        But then there’s the whole clouded title problem. What would I be buying ? How much faith can I place that I won’t find myself having ownership challenged ? Or get into a morass (both legal and logistically as a potential non-dom owner) with a servicer, MBS Trust, State, GSE or even previous owner showing up to contest the title ? Okay, I could buy title insurance but frankly, I wouldn’t trust the counterparties to that as far as I could throw them.

        So I’m more seriously considering Japan.

        There you go Mr. Geithner and President Obama, that’s $200k direct foreign investment you can kiss goodbye. I somehow, unfortunately, doubt they’ll worry over it.

        1. Susan the other

          The stuff I read on title insurance indicates it has become a joke, but it is outrageously expensive. The exceptions are the rule, especially the one now incorporated into every title policy that says the title insurer is not responsible for omissions and inaccuracies in the chain. Unbelievable. And one article said the only reason insurers will consider writing any policy at all is because the banks have assured them they (the banks) will take liability for certain “errors”. But this leaves the homeowner out. There really can be no title insurance when there is effectively no goddamn title.

          1. dejavuagain

            So title insurance no longer “insures” title – what is the point of it?

            In the beginning days, title insurance was really a form of erros and omissions nsurance cover acts of the attorneys that performed the title searches – in case the title attorney failed to find something of record or misinterpreted it. The core of the insurance was insuring the chain of title.

            Title policies then are written to include exceptions – sometimes the exceptions render the insurance meaningless.

            So, with that exception you mention, I am not quite sure anymore what is left.

            Also, remember, if you are a buyer, you need have some assurance that when you sell the property, the new buyer can obtain meaningful title insurance.

            Your title insurer is under no obligation to write a new policy for your buyer ten years from now (though, this may not apply in all states since real estate law is particularly local in nature).

      2. ambrit

        Mr Chase;
        I can gleefully envision this all dragging out long enough for ‘owner occupiers’ to claim adverse possession rights. Also, what about ‘squatters rights’ as a social movement? That idea could evolve into real Peoples Soviets.
        I imagine that the Kleptocrats have so fully internalized short term thinking that they honestly do not see the devouring monster they have engendered.

        1. monday1929

          If you fear the Kleptocrats devouring monster, and your family tree does not branch, you might be a redneck terrorist.
          Ok, just one more?

          1. ambrit

            Dear monday;
            (Any relation to Wednesday Addams, Tuesday Lobsang Rampa, or Friday Baldwin?)
            Being a redneck terrorist assumes you’re “straight up” and “root bound.”
            You might be a redneck terrorist if you mow the yard and find an APC. (I actually had a neigbhour in Louisiana who had, and used, at night of course, a Korean War vintage half track. Excellent vehicle for pulling stuck four wheelers out of the bottomlands mud with.)
            You might be a redneck terrorist if your idea of Homeland Security is a 12 gauge and a Glock.
            You might be a redneck terrorist if your idea of Austrian Economics is: “What the H— happened to my contribution to the Germania Foundation?”
            You might be a redneck terrorist if you think that now is the time to invest in gold.
            You might be a redneck terrorist if both your wife and your sister swear you were with them last night when the fires started.

  6. matt weidner

    What is developing in state courts…in response to this is the same legal dodge that was developed in response to borrower demands to see the PSA, “your honor, joe blow is not a party to those endorsements so he cannot question them…if they are forged, fradulent, that’s between the parties to the endorsement” there is in fact a specific section in the UCC….”all signatures on notes are presumed to be authentic”…our courts will do what they’ve done from teh begining…..NOTHING TO SEE HERE FOLKS….MOVE ALONG!



      Cockerell v. Title Ins. & Trust Co. (1954) 42 Cal.2d 284, 293. Indeed, our Supreme Court called the idea that courts could simply presume that mortgage notes were validly endorsed a “dangerous innovation.” Id. Rather, the law demands that one claiming the right to enforce a mortgage pursuant to an assignment prove the note was validly assigned to it. Id., 42 Cal.2d at p. 292.

      In Cockerell, a party claimed it had been assigned a mortgage note and was therefore entitled to the proceeds of a non-judicial foreclosure sale of the property securing the debt. Addressing the sufficiency of the evidence offered to prove the assignment, our Supreme Court wrote: “The burden of proving an assignment falls upon the party asserting rights thereunder . . . [T]he measure of sufficiency requires that the evidence of assignment be clear and positive to protect an obligor from any further claim by the primary obligee . . . .” Cockerell, supra, 42 Cal.2d 292, citations omitted. In other words, as between the borrower and one claiming the rights of an assignee, the assignee should bear the risk of competing claims by someone outside the apparent chain of title.
      Since an assignee acquires no better rights than those belonging to the assignor (Cockerell, supra, 42 Cal.2d at p. 293), the validity of the claimed assignments of the Plaintiffs’ mortgage note depends on the validity of each purported sale of their note.

      A court may not simply assume these facts: “Such assumptions, would indeed, constitute a ‘dangerous innovation.’” Id.

      Clear and positive evidence of valid sales includes the facts of each purported sale in light of:
      (1) California law prohibiting enforcement of the note and trust deed against the mortgagor absent negotiation of the note (i.e., indorsement by an authorized person and delivery); and
      (2) whether each sale was made in strict accordance with (a) the agreements contained in the PSA, as required under New York law, which expressly governs the relationship of the parties to the PSA, and (b) federal laws and regulations governing sales of mortgages to REMICs.

      A fast-growing body of case law arising out of the mortgage crisis holds that mortgagors have standing to assert claims in court to ensure that they only pay the right parties. See, e.g., Naranjo v. SBMC Mortgage (S.D. Cal. July 24, 2012) 2012 WL 3030370 (borrower alleging her loan was not validly assigned to trust may seek restitution of sums paid to defendants and declaration that defendants may not enforce note and trust deed); Javaheri, supra; Ohlendorf, supra; Kemp v. Countrywide Home Loans, Inc. (Bk. D. N.J. 2010) 440 B.R. 624, 629-630, 634) (bank bought note and mortgage as trustee under pooling and servicing agreement but never possessed the note; neither bank nor its servicer allowed to enforce the note); Deutsche Bank National Trust Co. v. Ramotar (N.Y. Sup. 2011) 2011 WL 66041 (allegations of robo-signing and other concerns about bank’s standing were sufficient to raise triable issues of fact precluding summary judgment in favor of bank suing to foreclose on Ramotar home); Bayview Loan Servicing, LLC v. Nelson (Ill. Ct. App. 2008) 382 Ill.App.3d 1184, 1188 (summary judgment in favor of foreclosing entity where there was no evidence it ever obtained any legal interest in the subject property); U.S. Bank National Assn. v. Ibanez (Sup.Ct. Mass. 2011) 458 Mass. 637, 649-650 (“Ibanez”) (banks which submitted self-contradictory securitization documents undermining their claims to have received assignments of mortgages could not foreclose).

      The Commercial Code does not make it impossible for an imposter to cloak itself with a patina of authority to collect on a note or exercise the power of sale in a trust deed. It certainly does not validate every transfer of a note; indeed, the Code accounts for the possibility that a party lacking actual authority to enforce a note or accompanying security agreement may attempt to enforce one or both.

      Although § 3203(b) provides that transfer of a negotiable instrument “vests in the transferee any right of the transferor to enforce the instrument, including [if applicable] any right as a holder in due course,” it goes on to state that “the transferee cannot acquire the rights of a holder in due course by a transfer, directly or indirectly, from a holder in due course if the transferee engaged in fraud or illegality affecting the instrument.” See also § 3302(a)(1)

      1. dolleymadison

        Excellent Post! Too often people assume that a “holder” is a “holder” even if the note was obtained illegally. The code does allow that this could happen – but the code does NOT say that it is PERMISSABLE. Too many attonreys wrongly make this assumpton.

      2. Nathanael

        You know what we need to make? We need to craft a collection of legal “boilerplate”, with quotes from precedential cases, to shoot down the most odious and bizarre arguments which are commonly used by the banksters to defend their frauds.

        It should be possible for a pro se homeowner, dealing with one of these outrageous banker claims (like “The court shouldn’t look into whether the document is fraudulent”), to have a printout of the reason why the court should not accept the outrageous claim.

  7. David Fiderer

    Thanks so much for this.

    No doubt about it, loan servicing fraud is the biggest form of organized crime in America, and only a relative handful of people are writing about it.

    1. monday1929

      OK, last one,

      If you are one of a “relative handful” of people writing about mortgage fraud, and you like holding your relatives’ hand, You might be a Terrorist redneck.

  8. McMike

    In other words, once the Obama administration legitimized and granted a letter of marquee to the banks’ covert mortgage doc fraud operations, the banks doubled down and got seriously brazen about doing more mortgage doc fraud.

      1. McMike

        But… He did CHANGE the law to say that he could assassinate citizens merely on his say-so, and I BELIEVE that he’ll do it.

    1. Susan the other

      Yes indeed. Wells went into overdrive after Obama’s settlement. How blatant does forgery get? Erasing the most recent allonges and fabricating one last one that matches LPS data putting everything in the trust? Taking care of the PSA agreement and the foreclosure at the same time. Clever.

      I remember reading that the banksters, aka MERS, had stored the files in various warehouses. One was in Minnesota. So this whistler’s account sounds like the temps were all shuffled into a giant building, a former airplane hangar, and given bins of documents to process. This means the Morlocks were in the back going through the bankers boxes as fast as they could, trying to track down the files. Maybe. I was so convinced that the docs had all been intentionally shredded and poorly digitized so the notes could be traded as if no trust ever existed that I’m almost surprised to see this story – about a giant warehouse and bins full of docs.

      But one question: For how long did these notes disappear? From the time they were contracted until 2011/2012? Or from the time they entered MERS? And how can it be established how many times they were traded before these final forgeries? It probably would have been better if the docs had been shredded. Because this is outrageous. It will take a while, but Wells, et.al. are hanging themselves slowly.

      1. Nathanael

        Countrywide was known to have shredded original mortgages and notes; so was one of the other “subprime specialists” which is now bankrupt. I can’t remember their name, it was really generic.

        The “big” companies mostly warehoused the documents rather than shredding them. They still ignored the contents of the documents, but you see, they were already paying for warehouse space, unlike Countrywide.

  9. Francois T

    Ladies & Gentlemen!

    100$ that not one executive will ever go to jail for this massive fraud.

    Place bets!

    1. ambrit

      Mr T;
      Considering that Wall Street is now the axis of the “Casino Economy,” your analogy is too apt. I noticed no odds though. Also, how low down on the totem pole does the term executive extend? I expect some token “miscreants” to be thrown to the Mob. It’s only good politics, after all.

      1. McMike

        I suspect that Wall Street will start having ordinary citizens arrested to serve for thier crimes.

        Sort of a lottery, where a name is pulled from the hat every time there’s a Wall Street crime, and that person does the time.

        This has luscious dystopian potential.

    2. denise


      Our future, our children’s as well as our grandchildren’s are in great peril if enormous measures are not taken.

      Maybe this is why DHS is preparing for civil unrest…when more American’s wake up they will be outraged…we need to take our country back and force EH to uphold his sworn oath AND FIX THIS.

  10. Bill Paatalo

    Great piece Yves!

    As you are aware of Dr. James Kelley’s work in the “Malin” case in TN, we are investigating numerous cases that all clearly reveal the so-called “original blue ink” notes as being “computer generated forgeries.” It appears this is an industrywide practice. If Wells Fargo temps are adjusting the endorsements, they are doing this from copies of notes within the LPS / “MSP” systems. Thus, the next step in the process is the coloring and fabrication of the borrower’s blue ink signature. After all, I can’t imagine a bunch of temps being allowed to tinker with actual original notes. This is exactly what we are seeing on a daily basis. Simply ask your source if he is aware of the Eagan, MN facility housing “original” notes in a vault. I highly doubt it.

    It’s all coming together – bit by bit, piece by piece. Major thanks to this whistleblower for having the “guts” and courage to speak!

    1. Pearl

      @ Bill Paatalo–Thanks for the info about the variations on Notes showing up in Tennessee.

      Several versions of the original Note have shown up in the Morgan v Ocwen case down here in Georgia (this fact is not apparent in the original Morgan v Ocwen ruling from July 2011–but the info gradually unfolds and, in fact, continues to unfold.)

      In Morgan v Ocwen, Ocwen’s foreclosure mill goons were finally ordered by the (Federal) judge to produce the “original” “Original Note.” So the homeowner meets up with them at a neutral meeting place and they (Ocwens’ foreclosure mill attorneys and an actual attorney that MERS had scraped up from Baker Donelson) present the really-honest-to-goodness version of the “original” Note.

      The homeowner inspects the note presented to him (in front of witnesses and a video camera) and realizes a glaring difference in this (third) version of the “original note.” The Original Note–that the homeowner had actually signed at closing (of which he had a copy) had his initials at the bottom of the first and second page of the (3-page) Note.

      (Initialing the bottom of unsigned pages of a document–especially on a document that is as important as The Note on your house–is done because you don’t want, at some point in the future–an extra page or two inserted into the document.)

      But, sure enough, the “Original Note” presented by Ocwen upon Order of the Federal judge (which, just to reiterate, was at least the third “version” presented by that time) completely lacked the homeowner’s initials at the bottom of page one and page two.


      There were other irregularities, as well–such as different ink combinations, an endorsement that had mysteriously moved from the bottom right to the bottom left of the third page, another version that had the crossing out of and voiding of one of the two signed endorsement, etc.

      Anywho…Morgan v Ocwen is on “administrative hold,” at this time, as are several other foreclosure lawsuits in Georgia, pending a ruling by the Georgia State Supreme Court in a case (that is actually in the form of several certified questions) identified as “You v JP Morgan Chase.”

      (The original ruling in Morgan v Ocwen, as well as the certified questions in You v JP Morgan Chase are both up at Google Scholar.)

      1. zawii

        Thank you for the information. Ocwen/US Bank refuse to work withe me to save my home.Trustee sale is scheduled for March 28, 2013. Is there any help for me to obtain in Riverside,Ca?

    2. Glen

      Your organization has done some excellent work! A graphic designer – VP of JPMorgan Chase. Who knows, maybe they will soon have dome hit men on the BoD.

  11. Generalfeldmarschall Von Hindenburg

    These people can do literally anything they want. The police become more and more militarized. We now have official policy that the state can order the summary execution without even the pretense of probable cause. Financial institutions are able to rob and swindle with zero accountability. How long until privatization leads to banks being able to imprison people for debt? About the next election cycle, I’d say.

  12. David

    People dont give a sh.t and there lazy.Ive been trying to rally folks on this and on Wells Fargo’s criminal ways for sometime now.Have them trying to pull this same crap on me as we type the dif is via there own correspondence and some digging the so called investor/owner of my fraud filled “loan”and I use that word as loose as it gets,filed BK and list Wells Fargo and its ugly stepsister US Bank as NON PRIORITY,UNSECURED CREDITORS,disputing there claims to any so called “trusts”and siting there servicing contracts as NULL and VOID in 09.Then they record a assignment to US bank ie-the trustee or trust in 2012 when according to there psa the cut-off was aug 06,and its robo-signed out of some parish in LA.The last time they sent me a copy of some fabricated note out of the blue theres a new robo-signed stamp on the last page that reads “pay without recourse blahblah and some name,vice president,vice president of what?Trying to steal your sh.t. They need to be dragged threw the streets and strung up in the town hall,Mr Sumph,and Mr Dimon just to mention a few,then how bout some IMPEACHING?Sounds about fair to me.

  13. Kristina

    Why would banks hire temp workers to doctor up paperwork when it would be so easy for these folks–with no allegiance or investment in their employers–to whistleblow and perhaps be party to a false claims suit, possibly raking in millions for themselves? Hey I’d like a job like that…anyone know if BofA or wells is hiring? :)

    Kidding aside this keeps getting better and better! Thanks to all the whistleblowers for their fascinating tales…(watching this horror unfold is like rubbernecking at a car wreck as you drive by…you know it’s grisly but just have to look…) since I was one of their casualties I just love reading about it…because I keep thinking it simply cannot get any worse…and then every day it does…thanks to the intrepid and intelligent reporting herein…

    you are my hero Yves….

    1. oregonchris

      I would think that most of these temp workers don’t realize they are being used to commit fraud. Its pretty complicated, and I bet if they expressed any doubts the supervisors would just lay blame on the borrowers for being in default.

    2. Nathanael

      You ask why the bank executives would expose themselves to such a large risk by hiring temps.

      The answer is in the degeneration from industrialist to financier to upper-class-twit. The industrialist understands how his business works. The financier doesn’t, but understands the legal and financial paperwork for it. The upper-class-twit doesn’t even understand that.

      The megabanks are run by upper-class twits at this point. They *do not understand* what they are doing. They are not clever criminals. They are simply ordering their underlings to do the impossible (“Go, make it possible for us to foreclose.”) The underlings shrug their shoulders and do a half-assed job at forgery; if they start getting worried about getting arrested, the underlings jump ship and quit. Nobody has an incentive to do a good job, *even at forgery*.

      1. Taxxee

        ‘Twit’is good but a little too nice. Criminally sociopathic greedy bastards would be better Even the mafioso were allowed the grudging respect of ‘thug’.

  14. neidermeyer

    Do we have a chain of command for WF at this location?

    Do we have access to this whistleblower for a legit deposition?

  15. Charles Reed

    Here is were Wells Fargo is caught red handed is with the Washington Mutual (WaMu) government insured loans (FHA, VA, USDA) that they foreclosed on after Sep 25, 2008 the day the bank was seized by the OTS & FDIC. So the FDIC sell all of WaMu’s loan, other asset and deposits to JPMorgan Chase.

    However the 1.3 million government loans that were in Ginnie Mae pools belonged to Ginnie Mae as far as the Notes because the debt was not a part of the transaction at all, as Ginnie Mae CANNOT buy or sell a home mortgage loan at all by law, as they are not a lender of home mortgages and are not regulated to do so!

    So as in my case what Wells Fargo did was to go back to the originator of the loan and have MERS submit fraudulent assignment of the deed of trust (title/lien) to Wells Fargo as if Wells had purchase the Note & debt.

    However on the Note it clearly shows that the originating lender who I was a loan officer for had a couple weeks after closing the loan sold the loan to WaMu and had signed endorsing the Note to WaMu as my boss the head of the mortgage originating signed it and conducted the sell for the bank.

    Next the loan was placed into the Ginnie Mae pool and WaMu had signed in blank the Note and relinquished to Ginnie Mae back in Sep 2003 and at that time WaMu would never have ownership of the loan again and the debt was actual wiped away because Ginnie Mae did not purchase the debt.

    Understand that at no time should I had to make payments because there was no one holding the debt, which was a fact I did not know and paid the payment until 2009 at a point because of the Housing market had tanked the bank I was working at released every single person in our mortgage dept.

    My case is the poster child for the abuse because it is in the state of NE which stupid MERS took the Dept of Banking & Finance to the State Supreme Court and won stating that they were not a “mortgage bank”. MERS is not register in the state to do business and did not finish there application to do business and receive the required certification from the NE Secretary of State.

    As NE has gotten defeated trying to make MERS pay the registration fees and have MERS supply information to register, it put in place a Foreclosure Protection Act in place that trapped MERS from not being able to assigning the assignment of deed of trust because neither they nor anybody they represented was the “holder in due course” NE Statute 76-2710 and it state that that is not an electronic registry!

    Now my case is more clearly laid out because I knew who to get the documents to back up the claims, from day one of the loan beging locked. But what it done as I have over a 1 1/2 have blown the whistle is that it uncovered the fact that 800,000 government insured loan during 2009-201 could not have been foreclosed as was done while these loan were supposed to be process through the HAMP programs.

    As this whistle-blower points out now Wells is pick a player to act as if the Notes were endorsed to them, however with Ginnie Mae it is a clear path that the loan were relinquished to Ginnie Mae and it a fact of law that Ginnie Mae cannot transfer the blank Notes because they are not a lender and they are not listed on the Notes at any time and there is no financial trail were Ginnie Mae paid monies for a single loan ever!

    Remember that Ginnie Mae is only a “insurer” for the investors who are buying Ginnie Mae Mortgage Backed (MBS) Securities that the lenders turned into “issuers” who had to relinquish the already closed free and clear of the bank/lender having a debt against the Note so that the lender/issuer could participate and sell MBS, as they were not and could not sell the home mortgage Notes to the non-lender investor were not purchasing the riskier mortgage loan that were not 100% guaranteed by the Federal Government as the MBS were 100% guaranteed.

    I expect the SEC to move on this matter as all these properties were illegally sold to cover Ginnie Mae’s obligation of insuring, plus Wells Fargo and other submitted and claimed falsely against the Federal Government insurance programs, and received monies from these claims in the amount of $8 billion during 2009-2010.

    So we the people are owed with treble damages $24 billion for the False Claims!

    1. LucyLulu

      As you stated, Ginnie Mae only insures the loans, it doesn’t ever own the loans. Loans insured by Ginnie Mae are originally owned by private banks approved by Ginnie Mae and then bundled into MBS and sold to investors, at least traditionally (don’t know about currently, now that MBS market has tanked). If WaMu had your loan, then it was bundled into an MBS and private investors purchased certificates for that MBS which included your loan. Loans insured by Ginnie Mae always have somebody else who owns them, they don’t suffer any loss of ownership upon being insured. Somebody (the current owner) receives the income stream, and it isn’t Ginnie Mae, though I presume GNMA receives a small percentage as an insurance premium. You would need to find out what trust/MBS purchased your loan from WaMu or the party that bundled your loan back in 2003. There’s a good chance that trust has since dissolved, in which case, your loan was sold to another party.

      1. Charles Reed

        Lucy I already know who was suppose to have been in possession of the Note and that was Ginnie Mae as part of Ginnie Mae pooling requirements, as the Note is used as the underlying collacteral so the Note cannot be sold first because Ginnie Mae cannot buy or sell a home mortgage loan by law of the US Congress.

        So it not whether or some procedure that someone else owned the loan, as we already have gotten a letter that Wells Fargo states the Ginnie Mae was suppose to be the lien holder. So your think the way they want you to think, but Ginnie Mae is unlike Fannie & Freddie because they don’t sell the Notes, as it about having the lenders sell MBS, and the Notes are kept for insurance purposes.

        The lender signed HUD 11711A that the Notes are conveyed to Ginnie Mae. This is not a Trust issue, but it an ownership iusse!

  16. LucyLulu

    This may be a nit-picky point, but for the sake of accuracy, you wrote:

    When our source arrived (spring 2011)

    then wrote:

    (and remember, this worker joined after the state/Federal mortgage settlement was final)

    Since the state/Federal mortgage settlement was inked in February 2012, did you mean that your source arrived at Wells Fargo in spring 2012 or did he arrive before the mortgage foreclosure settlement was final?

    1. Yves Smith Post author

      No, early AM typo, fixing proto! Aiee! Source missed it too, aargh! Arrived after the settlement.

  17. LucyLulu

    Yves wrote:

    Now what is peculiar about this is that our source reports that the notes were almost always endorsed to the trust (description includes Trust Series Name, Trust Number, Year). This is not only a permissible endorsement, some legal experts think it is the only sort of final endorsement that is proper.

    Do we know anything about Freddie/Fannie loans that WFC had? The reason I ask is that I was helping a friend who had a 2005 Freddie loan with WFC back in Oct 2010. I managed to get a current copy of her note from WFC who was also the document custodian by speaking with their document department in MN, it was the employees’ second day on the job. The note had exactly two endorsements, one from the originator, a small local company, the second by a Wells Fargo company. There was no endorsement to the Freddie trust. Would Fannie/Freddie notes be handled differently? Why? Or had the notes already been doctored during the intervening time period?

  18. Dan

    Yes, it is all an outrage, but does it matter? Nothing will be done and these big banks are immune to prosecution. I understand that we need to stay aware and keep fighting the good fight, but frankly, nothing will happen. This is the fraud business and fines are simply the cost of doing business.

    Frankly, there doesn’t appear to be any way that any of the major actors in the ongoing mortgage fraud will ever be called to account (look at what LPS did and they got away with it). This doesn’t even upset me anymore.

    1. Really?

      Likewise. Frankly, I suspect incompetence if they’re not committing fraud, given that that’s what they’re competitors are doing and the government at all levels is rubber stamping it.

    2. H. Alexander Ivey

      “Yes, it is all an outrage, but does it matter? Nothing will be done and these big banks are immune to prosecution.”

      Yes it matters. What to do is to warn family and friends NOT to buy a house, and be prepared for a major hassle when selling one. When enough people quit the housing market, the powers that be will listen and change.

      No, the big banks are not immune to prosecution, it just takes the political will to prosecution them. I hope that will happen, soon than later, but being totally negative is the same as saying the status quo is ok.

      1. Nathanael

        If you wanna buy a house, there are two ways:
        (1) buy in cash from someone who owns outright and had the last mortgage cleared in the 1980s or earlier.

        (2) pay a pittance — in cash — and then set about establishing adverse possession, with a fund set aside for the adverse possession lawsuit in 10 years.

  19. Charles R

    Does anyone know where one can find a list of all the holders of a note. ie CPI at LPS

    Thank you

  20. Sloppywriting

    A lot of silliness in this article, starting with the claim that:

    “An allonge is a separate piece of paper, attached (“affixed”) to a negotiable instrument so that more signatures can be added. They were virtually unheard of prior to the robosigining scandal, since in the normal course of business, there would be no reason to use an allonge (the margins and back of a note can be used for signatures).”

    Here’s a 1966 California case discussing allonges. You could find many more with minimal searching.


    1. LucyLulu

      Yves wrote that allonges were uncommon, not that going back 50 years, you’d find no cases of their use. Is that the best you can do?

      [ad hominem. –ls]

    2. Yves Smith Post author

      Tell me how much expertise in the UCC you have and how many real estate attorneys and law professors you have consulted on this topic. I will bet you a very large sum of money you have little or no empirical foundation for your straw-man effort to discredit my comment. I suspect you don’t even know (without doing investigation) how the UCC language on allonges has changed between the second and third version of the UCC.

  21. Stupendous Man - Defender of Liberty, Foe of Tyranny

    A great piece Yves, but you missed a spot.

    1000 Blue Gentian Road, Eagan Minnesota is separated by only 1.1 miles/3 minutes from 1270 Northland Drive, Suite 200, Mendota Heights, Minnesota.


  22. droubal

    We shouldn’t be all that surprised by this behavior. That is what happens when there are no consequences for breaking the law. This would apply only to really big companies of course.

    Somebody gets a few dollars more in food stamps than they deserve and the fine is $10,000 and possible prison time. The banks carry on a massive fraud scheme and the consequences are small. Probably a fine paid by shareholders.
    Eventually things will change, but it sure is painful to watch and wait.

  23. Tim Moxley

    I have been working on a case involving Hells Cargo for nearly two years now. Dealing directly with WF’s fraudulent docs processed in Minn. I can attest to the improperly executed notarization of the Corp. Ass. of Deed of Trust document as well as the forged signatures on the Note itself.
    Every Notarized document has to match the control document and if they do not match the notarization is invalid. If the document is therefore invalid, the contract (mortgage/ Trust deed)is nullified.
    As an attorney for the SEC explained to me, once the large scale investors begin to demand repayment for improper or falsely securitized collateralize debt obligations the banks will collapse under the demand to due to insufficient liquidity. Banksters can out spend individual home owners and baffle ignorant judges who often refuse to admit their ignorance, but large scale commercial hedge-funds and pension funding managers have the financial backing to build a solid case and when necessary shop for judges who are adequately informed to render these dog & pony shows illegal. Banks must be in possession of the Note prior to initiating foreclosure. If they are not, as is the case here, the are not a proper party of interest and the case must be (should be) thrown out. Forgery, fraud and/or improper/illegal notarizations are felonys in most states. Perjury is a misdemeanor, filing a forged instrument, mail fraud, wire fraud and securities fraud are all crimes punishable by fines, prison or both. Prosecutors are reluctant to file charges as my Dist Attny recently told me, “due to lack of funding or clear jurisdiction!!”
    Forge the title on your deceased relatives automobile and you go to prison quicker then you can jurisprudence.
    Fabricate legal documents and securities on an industrial scale and get invited to white house fund raisers where appearently they’ll offer you a job.
    Then there’s the question of unpaid taxes but who’s asking.

  24. hfrances

    Yves- Is it possible to ask your source if any World Savings/Wachovia/Wells Fargo loans were included in this doctoring process? Wells claims they own them all but some are sitting in a BNY Mellon Trust. I would love to know,

  25. Legal Definition


    A false representation of a matter of fact—whether by words or by conduct, by false or misleading allegations, or by concealment of what should have been disclosed—that deceives and is intended to deceive another so that the individual will act upon it to her or his legal injury.

    Fraud is commonly understood as dishonesty calculated for advantage. A person who is dishonest may be called a fraud. In the U.S. legal system, fraud is a specific offense with certain features.

    Fraud is most common in the buying or selling of property, including real estate, Personal Property, and intangible property, such as stocks, bonds, and copyrights. State and federal statutes criminalize fraud, but not all cases rise to the level of criminality. Prosecutors have discretion in determining which cases to pursue. Victims may also seek redress in civil court.

    Fraud must be proved by showing that the defendant’s actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result.

    These elements contain nuances that are not all easily proved. First, not all false statements are fraudulent. To be fraudulent, a false statement must relate to a material fact. It should also substantially affect a person’s decision to enter into a contract or pursue a certain course of action. A false statement of fact that does not bear on the disputed transaction will not be considered fraudulent.

    Second, the defendant must know that the statement is untrue. A statement of fact that is simply mistaken is not fraudulent. To be fraudulent, a false statement must be made with intent to deceive the victim. This is perhaps the easiest element to prove, once falsity and materiality are proved, because most material false statements are designed to mislead.

    Third, the false statement must be made with the intent to deprive the victim of some legal right.

    Fourth, the victim’s reliance on the false statement must be reasonable. Reliance on a patently absurd false statement generally will not give rise to fraud; however, people who are especially gullible, superstitious, or ignorant or who are illiterate may recover damages for fraud if the defendant knew and took advantage of their condition.

    Finally, the false statement must cause the victim some injury that leaves her or him in a worse position than she or he was in before the fraud.

    A statement of belief is not a statement of fact and thus is not fraudulent. Puffing, or the expression of a glowing opinion by a seller, is likewise not fraudulent. For example, a car dealer may represent that a particular vehicle is “the finest in the lot.” Although the statement may not be true, it is not a statement of fact, and a reasonable buyer would not be justified in relying on it.

    The relationship between parties can make a difference in determining whether a statement is fraudulent. A misleading statement is more likely to be fraudulent when one party has superior knowledge in a transaction, and knows that the other is relying on that knowledge, than when the two parties possess equal knowledge. For example, if the seller of a car with a bad engine tells the buyer the car is in excellent running condition, a court is more likely to find fraud if the seller is an auto mechanic as opposed to a sales trainee. Misleading statements are most likely to be fraudulent where one party exploits a position of trust and confidence, or a fiduciary relationship. Fiduciary relationships include those between attorneys and clients, physicians and patients, stockbrokers and clients, and the officers and partners of a corporation and its stockholders.

    A statement need not be affirmative to be fraudulent. When a person has a duty to speak, silence may be treated as a false statement. This can arise if a party who has knowledge of a fact fails to disclose it to another party who is justified in assuming its nonexistence. For example, if a real estate agent fails to disclose that a home is built on a toxic waste dump, the omission may be regarded as a fraudulent statement. Even if the agent does not know of the dump, the omission may be considered fraudulent. This is constructive fraud, and it is usually inferred when a party is a fiduciary and has a duty to know of, and disclose, particular facts.

    Fraud is an independent criminal offense, but it also appears in different contexts as the means used to gain a legal advantage or accomplish a specific crime. For example, it is fraud for a person to make a false statement on a license application in order to engage in the regulated activity. A person who did so would not be convicted of fraud. Rather, fraud would simply describe the method used to break the law or regulation requiring the license.

    Fraud resembles theft in that both involve some form of illegal taking, but the two should not be confused. Fraud requires an additional element of False Pretenses created to induce a victim to turn over property, services, or money. Theft, by contrast, requires only the unauthorized taking of another’s property with the intent to permanently deprive the other of the property. Because fraud involves more planning than does theft, it is punished more severely.

    Federal and state criminal statutes provide for the punishment of persons convicted of fraudulent activity. Interstate fraud and fraud on the federal government are singled out for federal prosecution. The most common federal fraud charges are for mail and wire fraud. Mail and wire fraud statutes criminalize the use of the mails or interstate wires to create or further a scheme to defraud (18 U.S.C.A. §§ 1341, 1342).

    Tax fraud against the federal government consists of the willful attempt to evade or defeat the payment of taxes due and owing (I.R.C. §7201). Depending on the defendant’s intent, tax fraud results in either civil penalties or criminal punishment. Civil penalties can reach an amount equal to 75 percent of the underpayment. Criminal punishment includes fines and imprisonment. The degree of intent necessary to maintain criminal charges for tax fraud is determined on a case-by-case basis by the Internal Revenue Service and federal prosecutors.

    There are other federal fraud laws. For example, the fraudulent registration of Aliens is punishable as a misdemeanor under federal law (8 U.S.C.A. § 1306). The “victim” in such a fraud is the U.S. government. Fraud violations of banking laws are also subject to federal prosecution (18 U.S.C.A. §§ 104 et seq.).

    The Federal Sentencing Guidelines recommend consideration of the intended victims of fraud in the sentencing of fraud defendants. The guidelines urge an upward departure from standard sentences if the intended victims are especially vulnerable. For example, if a defendant markets an ineffective cancer cure, that scheme, if found to be fraudulent, would warrant more punishment than a scheme that targets persons generally, and coincidentally happens to injure a vulnerable person. Federal courts may require persons convicted of fraud to give notice and an explanation of the conviction to the victims of the fraud (18 U.S.C.A. § 3555).

    All states maintain a general criminal statute designed to punish fraud. In Arizona, the statute is called the fraudulent scheme and artifice statute. It reads, in pertinent part, that “[a]ny person who, pursuant to a scheme or artifice to defraud, knowingly obtains any benefit by means of false or fraudulent pretenses, representations, promises or material omissions” is guilty of a felony (Ariz. Rev. Stat. Ann. § 13-2310(A)).

    States further criminalize fraud in a variety of settings, including trade and commerce, Securities, taxes, real estate, gambling, insurance, government benefits, and credit. In Hawaii, for example, fraud on a state tax return is a felony warranting a fine of up to $100,000 or three years of imprisonment, or both, and a fraudulent corporate tax return is punished with a fine of $500,000 (Haw. Rev. Stat. § 231-36). Other fraud felonies include fraud in the manufacture or distribution of a controlled substance (§ 329-42) and fraud in government elections (§ 19-4). Fraud in the application for and receipt of public assistance benefits is punished according to the illegal gain: fraud in obtaining over $20,000 in food coupons is a class B felony; fraud in obtaining over $300 in food coupons is a class C felony; and all other public assistance fraud is a misdemeanor (§ 346-34). Alteration of a measurement device is fraud and is punished as a misdemeanor (§ 486-136).

    In civil court, the remedy for fraud can vary. In most states, a plaintiff may recover “the benefit of the bargain.” This is a measure of the difference between the represented value and the actual value of the transaction. In some states, a plaintiff may recover as actual damages only the value of the property lost in the fraudulent transaction. All states allow a plaintiff to seek Punitive Damages in addition to actual damages. This right is exercised most commonly in cases where the fraud is extremely dangerous or costly. Where the fraud is contractual, a plaintiff may choose to cancel, or rescind, the contract. A court order of Rescission returns all property and restores the parties to their precontract status.

    Fraud is also penalized by administrative agencies and professional organizations that seek to regulate certain activities. Under state statutes, a professional may lose a license to work if the license was obtained with a false statement.

    One particularly well publicized area of fraud is Corporate Fraud. Corporate fraud cases are largely governed by the Securities Exchange Act of 1934 (15 USCA §§ 78a et seq.), along with other rules and regulations propagated by the Securities and Exchange Commission. These laws were a response to the market turmoil during the 1930s and well-publicized corporate fraud cases.

    The Securities Exchange Act and the SEC regulate anything having to do with the trading or selling of securities and stocks. They govern fraudulent behavior ranging from stock manipulation to insider trading. They also provide for civil and criminal penalties for corporate fraud.

    Despite the act and the SEC, in the early part of the twenty-first century, corporate fraud began to seem endemic. Such well-known companies as energy trader Enron, Telecommunications company WorldCom, cable provider Adelphia, and other lesser-known firms went into Bankruptcy as a result of corporate fraud. In light of these events, Congress decided to tighten up corporate fraud requirements with the passages of the Sarbanes-Oxley Act of 2002 (U.S. PL 107-204).

    Among other features, Sarbanes-Oxley required expanded and more frequent disclosure by public companies of their finances to prevent fraud. It created a Public Company Accounting Oversight Board to register and regulate accounting firms and accounting practices. It also enhanced the SEC’s power to monitor and investigate compliance with securities laws, adding stiff penalties for fraudulent behavior by corporations, their officers, and their accountants.

  26. L. Carr

    The essence of my fight is as follows:
    1. We were current on our mortgage payments in 12/2010
    2. At that time, due to serious questions, I demanded that Wells Fargo prove they were the holder or represented the holder of my note. There existed no assignments.
    3. They provided misleading and what turned out to be false information. Basically, “pay or else, just trust us.” They ignored further requests.
    4.I recorded a Bank Default with the County Recorder. WF did not contest it.
    5. I recieved a formal Notice of Default from the Default co. in Oct. 2012.
    6. I formally disputed the debt and again demanded they verify the Debt. Again, no response.
    7. I had a respected Law firm out of Chicago perform a Forensic Audit. The results were submitted in the form of an Affidavit, sworn testimony, by an expert.
    8. The Audit documented that the Trust, WF claimed held my note, had been terminated and liquidated (no properties, no assets, no directors, no nothing)on or before 3/25/2008. At that time WF no longer had any rights to the loan (PSA). No right to collect payments and certainly no right to foreclose. I had been paying them for almost 3 years.
    9. They then forged Assignments (transferred to and from an entity which ceased to exist some 3 years previous to the assignment. It was signed by a WF employee, for the Trust, but no name for the Trust was listed.
    10. They scheduled a sale. I was able to get a brief postponement, and while I was preparing documents, my house was sold. I received the notice of postponement and the new sale date by regular mail 3 days after the sale.
    11. I have since filed a Lawsuit and am fighting to stay in my home.
    12. I believe it is illegal to buy or sell stolen property. They have acted as a Mob Family, and my apologies to the Mafia.

  27. L. Carr

    Can someone help me better understand the difference between Fraud and Theft. Fraud allows a purchaser of a stolen property to keep the property (Bona-fied Buyer) where as I do not believe if the property was stolen the term BB applies. It is against the law to buy stolen Property. Help.

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