ForeclosureGate: Not just bungled paperwork, it is fraud (Part 1)

Posted by AzBlueMeanie:

Much of the mainstream media, with the notable exceptions of the New York Times and Washington Post in particular which "get it" as to the nature and the scope of the robo-foreclosure scandal, have demonstrated a lack of concern (I would argue a lack of knowledge of the legal complexities of foreclosure) for the fraud committed by major lending institutions.

Representative of this attitude was an opinion in the Arizona Republic last week, Don't prolong housing slump:

Some of the nation's largest mortgage lenders have frozen home foreclosures, the result of a burgeoning scandal regarding how banks have been handling the complicated process of foreclosure. In Arizona, those lenders include J.P. Morgan Chase and Bank of America, two of the state's largest mortgage lenders.

Have some banks bungled the foreclosure-documentation process? Evidence suggests they may have. Is this freeze a threat to the housing recovery that must lead Arizona and the U.S. out of the recession? It most certainly is.

* * *

The reasons behind the scandal are infuriatingly obvious to anyone reading the horror stories in The Republic written by our Catherine Reagor, or watching the reports of KPNX 12 News reporter Melissa Blasius. The evidence they have compiled of haphazard paperwork and callous treatment of homeowners is disturbing.

Unfortunately, a "resolution" of the scandal that requires months or years of court battles could cause even greater pain. All 50 states are contemplating legal action. Class-action lawsuits already have been filed, and ambitious lawyers are signing up entire neighborhoods as clients. Congress, as always among the last to see the consequence of its actions, is calling for investigations.

The nation's lawmakers in fact may be the last line of defense against this fast-expanding crisis, discouraging as that may seem. The rights of homeowners must be protected, but at the same time the American legal system should not constitute an economic suicide pact for the entire country.

Got that? The robo-foreclosure scandal is just 'bungled" and "haphazard" paperwork that can be readily fixed over time by lenders. There was no fraud in the origination of these motgages or the sales of mortgage-backed securities in the derivatives market. Those damn lawyers – and all 50 state Attorneys General, mind you - are just legal vultures looking to make a quick buck off lenders and traders who simply made "mistakes" in paperwork. Their suggestion seems to be that Congress should immunize lenders and traders from lawsuits. Forget about all those troublesome laws. Let them conduct business as usual.

As someone who used to do foreclosures and deed of trust sales as part of my practice, I can tell you from personal knowledge and expereince that this robo-foreclosure scandal is not as simple as the Arizona Republic misleads its readers to believe.

Susie Madrak writing at crooksandliars.com describes the problem. Just A 'Handful' Of Problems? Nope, At Least 4,500 Houses In NYC With Improper Mortgage Foreclosure Documents:

You know all those snide remarks the financial bobbleheads have been making about a "handful" of foreclosures with improper documentation?

[I]n New York City alone, it's more than 4,000:

Thousands of foreclosures across the city are in question because paperwork used to justify the seizure of homes is riddled with flaws, a Daily News probe has found.

Banks have suspended some 4,450 foreclosures in all five boroughs because of paperwork problems like missing and inaccurate documents, dubious signatures and banks trying to foreclose on mortgages they don't even own.

The city's not alone. All 50 states are investigating foreclosure paperwork, evicted homeowners are hiring lawyers and buyers of foreclosed homes are fretting over the legality of their purchases.

Last week, New York's top judge, Jonathan Lippman, began requiring all bank lawyers to sign a form vouching for the accuracy of their foreclosure paperwork.

That could have been a problem for one Long Island foreclosure that was being brought by GMAC Mortgage last year.

A sworn affidavit dated March 30 was signed by someone identified as Sherry Hall, vice president of a GMAC affiliate called Homecomings Financial Network.

Fifteen days later another sworn affidavit surfaced in another Suffolk County foreclosure, this time signed by a GMAC vice president named Sheri D. Hall.

Despite the difference in the names, the signatures were identical – and were vouched for by the same notary.

Suffolk Supreme Court Justice Peter Mayer refused to approve the foreclosure bearing the name Sherry Hall and ordered her, and the notary, to appear in court Nov. 17. GMAC officials did not return calls.

"It's nice to know someone in authority is looking at the fine print," said Derek McCoy, the delinquent homeowner in the case who's trying to keep his Coram home with a loan modification.

Mayer issued his decision Sept. 21, the day after GMAC, which was rescued from failure with a $17 billion taxpayer bailout, suspended foreclosures in the 23 states where court approval is required, including New York.

The moratorium, which ended last week, came after GMAC "robo-signer" Jeffrey Stephan admitted in a Maine case he'd signed 10,000 foreclosure documents a month without reviewing them.

Stephan also robo-signed in New York. The News found six Bronx foreclosures with his signature, including five in one month.

In one case, a judge halted foreclosure on an E. 242nd St. property because Stephan's affidavit did not include supporting documents. The case resumed after GMAC submitted the documents – and a new affidavit.

Judges are also seeing banks foreclosing on homes they don't yet own – a problem that concerns Brooklyn Supreme Court Justice Arthur Schack.

Schack said it's become increasingly "murky" trying to determine who holds a mortgage at the time of foreclosure because they're often passed from one lender to another.

At a state Senate committee hearing last year, Schack testified that the lender must prove it holds the mortgage on the day the foreclosure is filed.

"Sounds simple, but unfortunately it's not so simple at times," he said.

Last August, Schack dismissed a foreclosure the Bank of New York was bringing on an E. 48th St. home in Brooklyn that was filed 61 days before the mortgage was assigned to the bank.

The judge dubbed as "nonsensical" a computer printout the bank claimed proved it held the mortgage before the foreclosure was brought.

To be continued.