One of the sorry reminders of the decline of the rule of law in the United States is the frequency with which incidents of what look like document forgeries take place in foreclosure cases. The fact that a now-shuttered subsidiary of Lender Processing Services, a vendor to the servicing industry, had a price list for creating mortgage-related documents out of whole cloth attests to the long-standing demand for this sort of product.
The reason for this activity is simple. As we’ve stressed in various posts, in so-called private label securitizations (the non-Fannie/Freddie type), a great deal of evidence indicates that the originators and packagers of these deals did not bother complying with the contracts they created to govern these transactions on a widespread, perhaps pervasive basis sometime after 2003. And their shortcomings only come to light in foreclosures, and then (possibly) if the foreclosure is contested. Given how low foreclosure rates were historically, this was a risk the securitization industry seemed willing to take, and it is now reaping the fruit of this short-sighted bet.
The big problem for servicers and trustees (the parties that are responsible for the trust that holds the assets of the securitization) is that the pooling and servicing agreement which governs the securitization required that the note (the borrower’s IOU) be transferred though a specific set of parties by a specified time not all that long after the deal closed. Increasingly savvy anti-foreclosure lawyers recognize that the party attempting to foreclose may not have the legal standing to do so.
A new development is that the US Bankruptcy Trustee, which is part of the Department of Justice, has started poking around the nether world of slipshod and possible made-up documents, and is asking banks to explain what they are up to. These inquiries may be paving the ground for broader-based action.
The case in question is a Connecticut Chapter 13 filing (hat tip April Charney).
US Trustee Motion in CT for 2004 Examination
DeutscheBank purports to be the trustee for a particular 2005 mortgage securitization which contains the mortgage at issue. This is a partial list of the documentation problems; the motion itself makes for instructive reading:
In the first filing, Deutsche provides a copy of an undated promissory note which is not made out to the trust but the originator. A few days later, Deutshce filed an objection to the debtor’s plan of reorganization, and in it said the mortgage (the lien, not the note) had been recorded as transferred from the originator to Sand Canyon (a unit of Option One) in 2005 and then transferred to Deutsche less than two weeks before the bankruptcy filing. Note that a 2010 transfer is well outside the time parameters stipulated in the pooling and servicing agreement.
The borrower’s side asks what happened to the note, since there is no evidence it was transferred.
Several months later, Deutsche shows up in court with the usual fix for this sort of problem, an allonge (an attachment to a note that is so firmly secured that it is supposed to be inseparable to allow extra room for signatures. Query if the allonge were properly attached, how would it be possible to make a copy of the original note and not see at least part of the allonge?)
The truly creative part is these documents include an assignment of mortgage dated June 11, 2010, but effective as of May 1, 2005. I never knew law offices had time machines as part of their standard equipment. The trustee separately questions the 2010 assignment, since it was signed by an employee of Sand Canyon, when Sand Canyon did not own any mortgages or mortgage servicing rights at that point in time.
Even though the bankruptcy trustee is merely requesting a Rule 2004 examination (which means it wants someone from Deutsche to appear and answer questions about the case under oath), it is clear that he does not like what he sees so far:
The United States Trustee has reviewed the documents filed by Deutsche in this case and
has concerns about the integrity of those documents and the process utilized by Deutsche….Bankruptcy Courts have discussed the need for secured lenders to provide accurate information in filings before the Court… Consequently, “cause” exists authorizing the issuance of a subpoena to compel document production under Bankruptcy Rules 2004(c) and 9016…
The US Trustee has asked for a pretty extensive list of documents related to this bankruptcy. I’d love to be a fly on the wall and see the Deutsche employee try to explain his way out of this one.
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What needs to be explained to folk is that these organizations are directed by people that are hired by the very rich that own everything. Personnel and policies could be such that there was a healthy mix of competition and regulation that evolved as society changes but instead we have social meltdown while the rich masturbate at Davos while still hiring the same sociopaths that service them.
Task: How to educate the broad citizenry that this system of organized crime (the Land Scandal centering on mortgages, MBS, and foreclosures) is functioning in this way;
that the government has intentionally allowed and continues to allow organized crime to flourish in this way;
that the courts of law, except for idiosyncratic examples of judges who still abide by the law, are ignoring this organized crime structure (where they aren’t actively assisting it; I just read of a federal judge rejecting class status for investors suing over MBS fraud), and thus the courts are compromised.
It won’t be enough to keep this in the blogosphere and hope more people find it. Nor can we expect the MSM to spread the word. We may need a cadre of public lecturers, along the lines of the Farmers’ Alliance lecturers of the 19th century.
Speaking of organized crime…..I stumbled on a doozy yesterday. There is a “Jeffrey L Verschleiser” who was named in the Ambac vs. Bear Stearns and JPMorgan lawsuit. I investigated this guy. He has a corporation MLQ,LLC. This corporation has purchased into a gaming company in Vegas.
So, YES PEOPLE, this money is now organized crime. The mobsters are now considered “legitimate” if originated on Wall Street. Even though the money is now being funneled to the real organized crime scene in the gaming industry.
This is interesting. It looks like the bankruptcy courts may become part of the tugging on the stray pieces of yarn that can end up unravelling the sweater.
The trustees job is to sort out the various assets and claims to the them and then distribute the assets based on various legal procedures and orders of precedence. Falsified documents are probably not going to help them move up the priority chain very much and the bankruptcy court’s rulings may set some precedents on who owns all these mortgage notes.
do you think Chapter 7 trustees have any role here? for example, demanding to see the note/mortgage for its chapter 7 debtor homeowners, and confirming actual secured status as claimed? if a mortgage turns out to be unsecured, the home is an estate asset. My sense is you’d have to turn over several rocks, but if it paid off, the reward when it did would be big.
I would dearly love to believe that this Trustee’s ‘interest’ will be broadened into systematic investigation, prosecution where indicated, and remedial legal and legislative action. That’s the sort of thing I believed – and witnessed from time to time – in my youth, when the American legal system more or less worked. In recent decades I have seen far too many little lights in the darkness such as this come on, only to be quietly extinguished. Neither political party will take up this cause. The major media will cover this only if a group of wealthy stakeholders is unable to receive satisfaction behind closed doors, and then only grudgingly and inaccurately. But I would love to be wrong.
Billy Bob,
You are entirely right. They are still trying to sweep this under the rug.
I did get an email from the Asst AG that I have been working with on this investigation. He told me they will not be bought off, the Federal agencies that are now investigating are 11, along with all 50 AGs. I certainly hope there will be criminal charges coming down the pike, but I am growing more cynical every day.
I’m shocked that this Trustee hasn’t been bought off yet. Well he’ll probably get fired for doing his job “improperly”.
… or get charged with rape in Sweden.
The judges in the US ought to put Michael Hudson’s “The Monsters” on their reading lists. In the Intro section, he describes Ameriquest mortgage employees methods for using white-out, scissors, photocopiers to alter documents. Oh, and then there’s a guy who literally holds two pieces of paper against the window of a sunny skyscraper so that he can forge someone’s signature onto a mortgage document.
I’ve wondered whether that whole ‘we create our own reality’ meme (attributed to Karl Rove) so infected the entire culture that a whole group of Americans can no longer distinguish reality from make-believe.
Or make-it-up-as-you-need-to-believe.
So here’s hoping the US Trustee can still distinguish between ‘truth’ (i.e., verifiable facts and reality) vs ‘make-it-up-even-if-it-is-fraud’.
Emma Goldman once said, “If voting changed anything, they’d make it illegal.” This is the way I feel about the scattered investigations into Wall Street currently going on. If they were real, they would be stifled. Still hope springs eternal and in a system as corrupt as this one miscalculation is a certainty.
Heads are rolling now over at Coke Industries.
“Whose gotdamn job was it to fix the bankruptcy trustee? I thought we had that all taken care of. Get me Justice on the phone. Do I have to do everything myself? GET OUT OF MY OFFICE!”
“Hello, Eric, how’s the family?”…
This Scribd business is very frustrating.
Here is a public document in the public domain and Scribd is demanding that I subscribe to Facebook in order to download or print a copy of it. To hell with that.
Who the hell does Facebook think they are?
It’s an ever-widening web re: f-book et al. I passed on several attempts to download Scribd docs due to the fact that it pissed me off to see the incestuous connection with social vampire sites. Finally managed to just get access to Scribd.
Look below the f-book sign in and you can sign up independently….or what passed for it.
Please, for sites like scribd, use bugmenot dot com. Worked great for me.
Tunisia, Egypt, Yemen?, getting rid of kleptocracies is catching on fast.
Looks like they got some help…
http://stopforeclosurefraud.com/2011/01/31/boo-yaa-nj-appeals-court-reversal-lps-laura-hescott-assignment-fail-affidavit-fail-deutsche-bank-national-trust-company-v-wilson/