Saturday, October 16, 2010

Bogus Docs, Depos Wanted Now! WaPo Puts Out Call For Robo-Signer Foreclosure Documents, Depositions

According to The Washington Post's Political Economy blog:
  • A number of employees of mortgage servicers who signed documents indicating that they had reviewed the accuracy of thousands of foreclosure proceedings have testified in sworn depositions that they didn't actually perform at least some of the reviews.

  • If you have a copy of a foreclosure document that appears problematic or a deposition of one of these employees, please post it here. Or you can also send us information on your foreclosure using the form below [see story for intake form].

  • Send us your tips: foreclosure case reviews. We will not share your personal information.

Source: Do you have foreclosure documents or depositions related to 'robo-signers'?

How 2 Civilian Sleuths Brought Foreclosure Problems To Light

The McClatchy Newspapers report:
  • More than a year before lenders, law firms and document companies began owning up to widespread paperwork problems with their foreclosure filings, Lisa Epstein and Michael Redman already knew that something was wrong — very wrong.

  • Redman, a former online automobile consultant, got his first taste of the problem in early 2008, when he tried to help a relative who was facing foreclosure. [...] Epstein, a nurse who cares for cancer patients, also is going through foreclosure. She got her baptism in the world of shoddy foreclosure paperwork in the summer of 2009, however, when she tried to help a brain tumor patient keep her home.


  • Within a year, [Epstein] and Redman — who didn't know each other at the time — would leave their respective jobs to pursue their passion for helping others and exposing injustice in the foreclosure industry. After meeting late last year at a foreclosure fraud seminar, they teamed up to become two of the nation's most influential civilian beat cops for the beleaguered foreclosure industry.

  • Equal parts agitators, activists and advocates, Redman and Epstein have made their presence felt in Florida and nationally through their respective websites, and

For more, see How 2 civilian sleuths brought foreclosure problems to light.

See also Daily Business Review: Grassroots effort leads to attorney general probe.

The Bogus Foreclosure Document Drumbeat Continues

The New York Times reports:
  • At JPMorgan Chase & Company, they were derided as “Burger King kids” — walk-in hires who were so inexperienced they barely knew what a mortgage was. At Citigroup and GMAC, dotting the i’s and crossing the t’s on home foreclosures was outsourced to frazzled workers who sometimes tossed the paperwork into the garbage. And at Litton Loan Servicing, an arm of Goldman Sachs, employees processed foreclosure documents so quickly that they barely had time to see what they were signing. “I don’t know the ins and outs of the loan,” a Litton employee said in a deposition last year. “I’m not a loan officer.”

  • As the furor grows over lenders’ efforts to sidestep legal rules in their zeal to reclaim homes from delinquent borrowers, these and other banks insist that they have been overwhelmed by the housing collapse.


  • And even when banks did begin hiring to deal with the avalanche of defaults, they often turned to workers with minimal qualifications or work experience, employees a former JPMorgan executive characterized as the “Burger King kids.” In many cases, the banks outsourced their foreclosure operations to law firms like that of David J. Stern, of Florida, which served clients like Citigroup, GMAC and others. Mr. Stern hired outsourcing firms in Guam and the Philippines to help.

  • The result was chaos, said Tammie Lou Kapusta, a former employee of Mr. Stern’s who was deposed by the Florida attorney general’s office last month. “The girls would come out on the floor not knowing what they were doing,” she said. “Mortgages would get placed in different files. They would get thrown out. There was just no real organization when it came to the original documents.” Citigroup and GMAC say they are no longer giving any new work to Mr. Stern’s firm.

For more, see Bankers Ignored Signs of Trouble on Foreclosures.

ABC News On Bank-Ordered Illegal Lock Outs

ABC News reports:
  • It's one of the few booming businesses in this bruised economy – companies hired by banks to change the locks and take over homes that have been foreclosed. But in a growing number of cases, these real estate repo men are showing up before the foreclosure process is done – and sometimes, before a home is even in foreclosure.(1)

For more, see Mortgage Bullies?: Banks Accused of Illegally Breaking Into Homes Facing Foreclosure (Business for Property Preservation Companies Booms).

(1) Earlier media reports reveal that at least one Massachusetts law firm is apparently going around the country taking on these illegal lockout cases on behalf of screwed-over homeowners. See:

For those homeowners who've been screwed over by wrongful lockouts by foreclosing lenders (and their confederates) and seek some possible guidance on how much their cases might be worth if they seek to sue, see:

NY AG Brings Criminal, Civil Charges Against Buffalo Bill Collector Targeting Servicemembers; Outfit Made Threats To Tell Commanding Officers: AG

From the Office of the New York Attorney General:
  • Attorney General Andrew M. Cuomo [] announced the filing of felony charges against the owner of a debt collection company that targeted military personnel and harassed active members of the military and their families.

  • The investigation led to the filing of criminal charges against Stephanie Lowinger of Anderson Place in Buffalo, owner and operator of Neimen, Rona & Associates, formerly Morgan, Stone & Associates and now known as Gordon, Cappolli & Associates, all debt collection companies based in the Buffalo area.

  • In addition to the criminal charges, the Attorney General has also filed a civil lawsuit seeking to shut down Lowinger’s operation and secure restitution, penalties, and costs. The action is the latest in Attorney General Cuomo’s ongoing probe of illegal practices in the debt collection industry.

  • Attorney General Cuomo’s investigation found that Lowinger specifically targeted military personnel, referring to their alleged debts as “special accounts.” Lowinger instructed employees to find out where the military members were stationed and identify their commanding officers. Lowinger had employees threaten to call and, in some cases, actually did call the commanding officers, both of which are illegal debt collection tactics.(1)

For more, see Attorney General Cuomo Announces Felony Charges Against Owners Of Debt Collection Company That Targeted Military Personel (Cuomo also files civil suit to shut down company; Actions part of industry-wide investigation into abusive debt collection companies).

(1) According to the NY AG press release, complaints already received and evidence uncovered during the investigation show that military service members and their families were subjected to wrongful practices, including:

  • Unauthorized calls to commanding officers,
  • Threats of arrest by military police,
  • Threats of a dishonorable discharge,
  • Threats of loss of security status,
  • Threats of court martial.

Robo-Signing Scandal: Foreclosing Lenders Acting Like 'Hyenas On The Serengeti'???

An anonymous Guest Author on the blog, The Big Picture, recently referenced a (satirical) press release purportedly from Bank of America regarding its approach to handling foreclosures. An excerpt:
  • Bank of America announced that it has discovered a few trivial, easily-remedied technical problems with some of its mortgages. “We will stop foreclosure sales in some states until our assessment has been satisfactorily completed, or until the politicians whom we have compensated so generously do their damn jobs and get rid of those pesky laws and rights that are slowing us down."

On the issue of multiple lenders simultaneously foreclosing on the same property, the purported BofA statement continues:

  • "I know it is a bit confusing to citizens when our competitor HSBC and another bank simultaneously try to foreclose on the same property, especially when they are in a federal foreclosure prevention program. It’s sort of like one of those programs on Animal Planet where each hyena grabs a leg of the still twitching gazelle and tries to pull it away from the other hyenas. But that’s the way nature works—nobody asks those hyenas petty-minded questions about whether title to the gazelle was properly transferred, and to which hyena, and whether the title was properly notarized by an authorized local cheetah. Sometimes a company just has to sink its fangs into a customer, lock its jaws, which can exert a pressure of 1,000 pounds per square inch, brace its legs, yank, and see what tears loose. If we get the wrong gazelle, we will make every effort to compensate it for our erroneous gnawing, bone-crushing, and marrow-sucking.”

On the issue of due process, and the concern that JPMorgan may invade its turf, the purported statement continues:

  • "On the Serengeti, due process means that the gazelle runs as fast as it can and the pack keeps ripping small chunks off until the gazelle collapses due to shock and blood loss and inability to pay for a lawyer. There may have been some trivial, unimportant problems with the relevant documents, but we are confident that many of those gazelles really did owe us money, and we believe that our ripping them into pieces, digesting them, and regurgitating their horns and hooves is ecologically sound and generally in accord with the law of nature. Now, if you’ll excuse me, I will have to go mark the boundaries of my pack’s territory with the musk from my anal scent gland. We don’t want other hyena packs like J.P. Morgan invading our turf."

For more, including the response from a purported JP Morgan spokesperson, see Bank of America Announces That It Has Discovered Some Trivial Technical Problems With a Small Number of its Mortgages.

Friday, October 15, 2010

Five Face Criminal Charges For Roles In Now-Defunct Upstate NY Sale Leaseback, Equity Stripping Foreclosure Rescue Peddling Operation

In Albany, New York, the Albany Times Union reports:
  • A honeymoon in Europe, cruise to Antigua, spa treatments and free rent. It all came about, authorities say, because of a massive mortgage fraud scheme based on Central Avenue in Colonie. And now five defendants -- including a once-disbarred local attorney -- face felony charges from state Attorney General Andrew Cuomo that could send every one of them to state prison.

  • They stand charged with taking part in a multi-million-dollar scam in which Rivertown Investments of 1762 Central Ave. allegedly used bogus buyers to dupe banks, lenders, real estate owners and title insurance corporations.

  • Kevin P. Wheatley, 37, a Waterford lawyer for the company, was quietly arraigned Thursday before Judge Stephen Herrick in Albany County Court on a 23-count felony indictment accusing him of first-and-second degree grand larceny, scheming to defraud, forgery and falsifying business records. The indictment alleged Wheatley stole property and the proceeds of a mortgage loan exceeding $1 million on April 24, 2007, in Albany County. It stated he committed the same crimes for several other properties in Albany County. All exceeded $50,000. The first-degree grand larceny count alone carries a possible 25-year prison sentence.(1)


  • Rivertown owner Geoffrey Goldman, 34, of Albany faces a possible 15 years behind bars on charges of second-degree grand larceny and falsifying business records. Goldman started the company in 2002.

  • Criminal complaints in the case described its actions as follows: Rivertown would solicit homeowners in financial distress to sell their homes to the company. Rivertown, in turn, would lease the homes back to them for a term, usually 18 months. It was under a promise that net equity would be held for downpayment on repurchase of the property.

  • But despite promises that Rivertown would purchase the properties, the company allegedly used straw buyers who would obtain properties -- then immediately sign deeds transferring the titles to a Rivertown holding company without notifying lenders or getting their consent. Court papers noted an investigator said one defendant told him the monthly income of straw buyers was grossly inflated on mortgage applications.

  • A criminal complaint against Geoffrey Goldman noted that a portfolio for Rivertown showed 105 lease-back properties in New York, Pennsylvania and New Jersey at prices ranging from $112,000 to more than $2.6 million. Closing dates ranged from August 2003 to March 2008. But authorities say in some cases homes were never sold back, customers were evicted and some clients who repurchased homes had to spend thousands of dollars beyond their initial agreement.(2)


  • Wheatley is the only defendant who has been indicted.(3) Complaints show all the other defendants gave interviews with an investigator. A person with knowledge of the case said some defendants, if not all, have agreed to cooperate against Wheatley. Lawyers for the defendants could not be reached.

For more, see Loan fraud probe nets 5.

Thanks to an anonymous reader for the heads-up on the story.

(1) Repotedly, Wheatley, who started working for Rivertown in 2005, previously worked at law firms in Troy and Latham and was disbarred in 2002 by the Appellate Division's Committee on Professional Standards for "dishonesty, fraud, deceit and misrepresentation." Wheatley, who did not initially challenge the allegations, was reinstated in 2005, the story states. Wheatley's prior professional misconduct, which led to his disbarment, included failure to show up at court conferences, hiding files from clients and misrepresenting the status of cases to the court and clients, the story states.

(2) Others charged include:

  • Jonathan R. Goldman, 28, of Newburgh, Rivertown vice president and chief marketing officer and an alleged straw buyer, was charged with scheming to defraud;

  • Jordan Laccetti, 30, of Saratoga Springs, a loan officer at Rivertown, was charged with falsifying business records. Both face up to four years in prison;

  • Jessica Peryea, 27, of Albany, a licensed real estate broker and sales director at Rivertown, who faces a grand larceny charge. Peryea, an alleged straw buyer, faces up to seven years behind bars.

(3) To the extent Wheatley, an attorney, was acting in his capacity as such when allegedly screwing over the victims, the victims may be able to turn to The Lawyer's Fund for Client Protection of the State of New York for recovery of money.

For similar "attorney ripoff reimbursement funds" that cover the financial mess created by the dishonest conduct of lawyers licensed in other states and Canada, see:

Maps available courtesy of The National Client Protection Organization, Inc.

Spotlight Continues On Head Of Alleged South Florida 'Robo-Signer' Racket

Columnist Max Abelson writes in The New York Observer:
  • Every good crisis deserves a good villain, and every good villain deserves a good yacht. As if the ongoing foreclosure fiasco wasn't already scary enough, the top Wall Street Journal item right now is the news that Fannie Mae and Freddie Mac are reviewing the work of the enormous Florida law firm run by David J. Stern, which they both have sent work to for years. It's the first time the mortgage giants have been directly drawn into the ongoing crisis, because though they don't actually service loans, they do use the foreclosure mills that are turning out to be rife with fraud.

For more, see Is This Foreclosure Supervillain David J. Stern's Yacht 'Misunderstood'?

In a related story this week on Stern, see The Wall Street Journal: Document Mess Hits Fannie, Freddie (Fannie, Freddie cut Stern income stream).

Four Attorneys Face 'Robo-Signing' Allegations In Civil Suit That May Affect As Many As 10,000 Maryland Homeowners

In Baltimore, Maryland, WBAL-TV Channel 11 reports:
  • A lawsuit accuses several Maryland attorneys of falsifying foreclosure documents. The suit was filed Wednesday on behalf of three Marylanders who have faced or could face foreclosure.


  • [The Lembachs] hired an attorney, who they said they found a common theme in their case and others: falsified documents. [...] A lawsuit filed on behalf of the Lembachs and two other Maryland homeowners accuses four Maryland attorneys of filing invalid foreclosure documents by not signing the paperwork themselves.

  • The lawsuit claims that the practice caused "hundreds if not thousands of inaccurate documents to be filed as part of foreclosure proceedings before Maryland state courts." "There was fraud all the way through this. I mean, every one of them falsified these documents by having other people sign for them. And the signatures never matched up," Gerald Lembach said.

  • The attorneys listed in the suit include Howard Bierman, George Geesing and Carrie Ward, and 11 News was not able to reach any of them for comment. The Lembachs’ attorney said as many as 10,000 people could be affected in the state of Maryland. The attorney predicts the case will grow to a class action lawsuit.

For the story, see Suit Filed Over 'Falsified' Foreclosure Documents (Attorneys Say Case Could Affect More Than 10,000 Marylanders).

Class Action Claims Loan Servicer Pocketed Payments From Financially Strapped Homeowners In Exchange For 'Bad Faith' Loan Modification Promises

In Los Angeles, California, Courthouse News Service reports:
  • Indymac Bank and its successor, OneWest Bank, defrauded homebuyers by promising to modify their mortgages, but "never at any time possessed a good faith intention to perform on these loan modification agreements," a class action claims in Superior Court. "Defendant sought only to induce homeowners into making further payments and defraud homeowners of their money."


  • "Hoping to keep their homes, thousands of defaulted borrowers relied upon defendants' promises and paid to defendants significant amounts of money that they would not otherwise have paid, had they known that defendants did not possess a good faith intention to perform pursuant to the loan modification letter agreements. ...


  • The class seeks promissory estoppel(1) and punitive damages for fraud, breach of contract, breach of faith, unjust enrichment, negligent misrepresentation, and business code violations.

For more, see Class Claims Indymac Bank Hustled Them.

(1) See Court: "Promissory Estoppel" Could Make Lender’s Verbal Agreement To Halt F'closure Sale Enforceable, Even Absent Consideration For Promise To Stall, where a California appeals court earlier this year applied the doctrine of promissory estoppel to hold a lender to its verbal agreement with a borrower to halt a foreclosure sale, even though there was no contractual obligation for the lender to do so (ie. the borrower paid no consideration in exchange for the lender’s promise to postpone).

The Lionization Of The "Deadbeats" In The Bogus Foreclosure Documents Scandal

Some interest appears to be building about the 'lionization of the deadbeats' involved in the foreclosure "robosigner" scandal. However, there is some disagreement as to who exactly these deadbeats are.

For opposing views, see:

Maryland Boots Six Notaries Over Robosigning Allegations In Foreclosure Actions

Buried at the end of a recent story on robosigners, The Washington Post reports:
  • [S]ix notaries have been removed from office since August, said Rick Morris, director of charities and legal services at the Maryland secretary of state's office. All worked for law firms that handled foreclosures, Morris said. These notaries did not witness the person sign the document or did not keep not keep a registry as a record as required by state law.

  • "The six notaries involved in this were afforded the opportunity for a hearing in the office of secretary of state," Morris said. "Based on failure or refusal to have a hearing, we removed them from office."

Source: Prince George's court reviewing foreclosures over filing concerns.

Thursday, October 14, 2010

Wells Fargo May Be Added To 'Robo-Signer Scandal' List

The Wall Street Journal reports:
  • Wells Fargo & Co. (WFC) may be added to the list of big mortgage companies that use "robo-signers" to execute piles of foreclosures.

  • In a deposition for a lawsuit in Palm Beach County, Fla., an employee in Wells Fargo's sprawling mortgage servicing business said she signed "hundreds" of foreclosure affidavits a day without verifying the documents' information, as her signature would imply.

  • The San Francisco bank had until recently avoided the revelations of improper foreclosure practices that have dogged large competitors like J.P. Morgan Chase & Co., Bank of America Corp. and government-controlled Ally Bank. A number of banks and mortgage servicers have issued moratoriums on foreclosure sales while they review how they process foreclosures.

For more, see Florida Deposition Offers Evidence Of Wells Fargo 'Robo-Signing' (requires subscription; if no subscription, GO HERE, then click appropriate link for the story).

F'closure Mills Yield To 'Voluntary Emasculation' To Win Loan Servicing Work; Industry Insider: "Law Firms Have Been Flat-Fee'd Into 'Vendor' Status!"

In a recent editorial, Housing Wire publisher Paul Jackson makes this observation on the relationship mortgage loan servicers have with their attorneys:
  • I’ve seen first hand the sort of nonsense that passes as ‘efficiency’ in mortgage servicing, since I spent years working as part of the industry. I’ve seen bank clients demand that a law firm I once worked for proceed with an eviction prior to the expiration of a given notice period; and I’ve seen line staff at banks threaten attorneys with removing cases should the law firm fail to do their bidding, even if that bidding directly contravened existing laws. (And this was in 2004; I can't imagine what it's like now.)

  • Beyond witnessing it myself, I’ve heard stories over the years from numerous attorneys that practice in the field about the nonsense their clients would demand of them. The insults on top of injury here are as numerous as they are now part of the servicing industry’s very fabric. Attorneys that manage foreclosures often aren’t usually even referred to as legal counsel anymore, insofar as many banking personnel are concerned.

  • The law firms have been flat-fee'd into “vendor” status, instead, no different than whatever vendor is delivering office supplies. And these attorneys are often also subjected to the indignation of having to go through vendor management departments just even to be able to begin working for a given bank. Show me one other industry where this is how legal work gets done.


  • [W]hen banks decided to take the GSE guidelines as literal gospel, requiring that the law firms manage every case exactly to the published timelines or else, things began to change. Non-attorneys placed in management roles at banks and elsewhere were trained only on the importance of timelines, rather than the virtues of legal risk management. Many were thrown into servicing operations with marching orders to ‘manage process’ without really knowing what, exactly, they were supposed to be managing. So everything became about the timeline. And I mean everything.

  • There’s an old adage that says when all you have is a hammer, everything starts to resemble a nail. It applies in spades here. Layer on top of this a surge in foreclosures so large that it has quite literally overwhelmed attorneys and servicers alike.(1) With a series of bank managers that have now been trained to only understand timelines, and a glut of foreclosures now stuck in the system, law firms — ahem, make that vendors — found themselves having to answer to angry bank managers that wanted to know why so many of their files were stuck in “exceptions” and not hitting the timelines that the bank’s computer systems said they were supposed to.

For more, see Foreclosure mess exposes the rot from within.

(1) The foreclosure processing system operated by the loan servicers and foreclosure mill attorneys (or are they now just 'vendors') has been likened by some as 'Lucy on the chocolate factory assembly line' - a reference to the episode of the 1950s "I Love Lucy" situation comedy in which characters Lucy Ricardo (played by Lucille Ball) and Ethel Mertz (played by Vivian Vance) are furiously grabbing chocolates off a fast-moving conveyor belt and stuffing them into their mouths. See, for example:

By the way, for those of you who have never heard of "I Love Lucy" or never saw the referenced-episode that now dates back over half a century, go here to watch the excerpt of Lucy on the chocolate factory assembly line (and watch Lucy and Ethel play the roles of the loan servicers/foreclosure mills, 50+ years ahead of their time - approx. 3 minutes).

Use of 'Corrective Affidavits' in Foreclosure Actions Now Under Court Scrutiny In Prince George's County

In Prince George's County, Maryland, The Washington Post reports:
  • A Maryland court has begun to review some of 14,500 foreclosure cases pending after finding that the documents were not always signed by the lawyers who claimed to have signed them.

  • The Prince George's County Circuit Court is reviewing foreclosure cases that have a "corrective affidavit," said Judge Thomas P. Smith, who heads the court's new foreclosure committee. In those affidavits, foreclosure lawyers said that they did not sign the original affidavits or other documents that they purportedly signed before a notary public under oath, but that they reviewed them and affirmed the information is correct, Smith said.

For more, see Prince George's court reviewing foreclosures over filing concerns.

Media Reports Continue Shining Light, Applying Heat On Florida's Foreclosure "Rocket Dockets"

In Martin County, Florida, Bloomberg News reports:
  • Home to more foreclosures than 47 U.S. states, Florida sought to clear out its backlog with a system of special court hearings that dispensed with cases quickly, sometimes in less than a minute.

  • Homeowners like Nicole West now threaten to slow that system, Florida’s so-called rocket docket, to a crawl. West, who has been fighting to save her Jensen Beach house from foreclosure, has leveled a new allegation in her three-year battle: the entire process is based on fraud. [...] The banks said they are investigating homeowner charges like West’s that signatures were forged and documents were backdated.


  • Four employees of Lender Processing Services signed assignments transferring West’s mortgage, according to an affidavit submitted on her behalf by Lynn Szymoniak, a West Palm Beach attorney. They signed the documents as officers of American Home Mortgage Servicing Inc. and Option One Mortgage Corp. even though they were actually employed by Lender Processing Services, according to Szymoniak’s affidavit.

  • These assignments were signed and notarized more than a year after Deutsche Bank filed the foreclosure suit. For that reason, the Wests question whether the bank has the legal right to file a lawsuit seeking foreclosure. [... M]ichelle Kersch, Jacksonville-based Lender Processing’s spokeswoman, said in a statement that its subsidiary, Docx, executed the documents and that “it had proper authority and review processes in place.”

For the story, see Florida's 30-Second Foreclosure Dash Hits Wall of Fraud Claims.

More On Mortgage Loan Servicers & Their Screw-Ups

Mike Konczal writes in the blog, Rortybomb, on how mortgage loan servicing companies fit into the robosigner foreclosure mess. An excerpt:
  • [T]he first rule of mortgage lending is that you don’t foreclose. And the second rule of mortgage lending is that you don’t foreclose. I’ll let Lewis Ranieri, who created the mortgage-backed security in the 1980s, tell you:

    The cardinal principle in the mortgage crisis is a very old one. You are almost always better off restructuring a loan in a crisis with a borrower than going to a foreclosure. In the past that was never at issue because the loan was always in the hands of someone acting as a fudiciary. The bank, or someone like a bank owned them, and they always exercised their best judgement and their interest. The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary.”

  • In the past you had Jimmy Stewart banks. The mortgages were kept on the books of the bank. You had someone who you could go to and renegotiate your mortgage. With mortgage-backed securities, the handling of payments and working-out of troubles moved to servicers. If you are learning about this crisis for the first time, understanding what is broken here is very important.

For more, see:

Wednesday, October 13, 2010

Mortgage Industry Insider Acknowledges 'The Writing On The Wall' As Drumbeat Of Robosigning, Fraudulent Foreclosure Document Scandal Continues

Housing Wire publisher Paul Jackson writes:
  • Believe it or not, mortgage servicing is a noble industry. Or, at least, it’s supposed to be. Even in managing borrower defaults and repossessing property, there is something noble to the work, underneath it all — and it comes from following the law, enforcing contracts, ensuring that our nation’s system of property rights maintains its integrity for all Americans.

  • In many ways, for me, being involved in the machinery of servicing loans when I first started my career was sort of like being a financial cop; and it seemed to serve the same useful societal functions, too. There was purpose to the work that gave what we did meaning.

  • Call it youthful idealism. That idealism is now dead for me, for many reasons, including getting older and gaining a more realistic perspective on the industry I've been a part of.

For more, see Foreclosure mess exposes the rot from within.

Robosigners: "What's A Mortgage ... What's An Affidavit ... What's A Complaint???" Some Acknowledge Lying When Signing Foreclosure Documents

The Associated Press reports:
  • In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in "foreclosure expert" jobs with no formal training, a Florida lawyer says.

  • In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn't define the word "affidavit." Others didn't know what a complaint was, or even what was meant by personal property.

  • Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers' accusations about document fraud.

  • "The mortgage servicers hired people who would never question authority," said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them — earning them the name "robo-signers."(1)

  • The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.


  • Until now, only a handful of depositions from robo-signers have come to light. But the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

For more, see Robo-signers: Mortgage experience not necessary.

(1) According to the story:

  • The depositions paint a surreal picture of foreclosure experts who didn't understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners' loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn't define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff's assignor or defendant. She testified that she didn't know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. "I don't know the ins and outs of the loan, I just sign documents," she said at one point.

CEO Dimon: Chase Stops Using MERS

ABC News reports:
  • JPMorgan Chase's CEO says the bank has stopped using the electronic mortgage tracking system used by major financial institutions. Lawyers have argued in court proceedings that the system is unable to accurately prove ownership of mortgages. JPMorgan Chase & Co. and other banks have suspended some foreclosures following allegations of paperwork problems in thousands of cases.

  • JPMorgan's CEO, Jamie Dimon, made the announcement in a conference call Wednesday to discuss the bank's quarterly earnings. The Mortgage Electronic Registration System, or MERS, acts as a trading house for millions of mortgages. Lawyers for homeowners say the system lacks the required paper trail to prove mortgage ownership in foreclosure proceedings.

Source: JPMorgan Exits Electronic Mortgage Tracking System (JPMorgan stops using electronic mortgage tracking system under scrutiny in foreclosure mess).

Former Hairstylists, Wal Mart Floor Workers, Assembly Line Employees Among 'Suspects' Hired As Robosigners, Says Foreclosure Defense Attorney

Democracy Now! reports:
  • On Tuesday, a Florida attorney representing hundreds of homeowners released depositions of bank employees describing the frenzy to approve foreclosures on a mass scale. The lawyer, Peter Ticktin, says he deposed 150 workers who say they signed foreclosure affidavits without looking at them. Some of the workers had no experience and received no training after previously working as hairstylists, Wal Mart floor workers, and assembly line employees.

Source: Lawyer: Lenders Hired Workers With No Experience to Approve Foreclosures.

See also, Robosigners: "What's A Mortgage ... What's An Affidavit ... What's A Complaint???" Some Acknowledge Lying When Signing Foreclosure Documents.

Foreclosures Gone Wild!: Understanding The Legal Issues Surrounding The Recent Foreclosure Freezes & Investigations

An email authored by South Florida foreclosure defense attorney Michael Wrubel appears on the Livinglies weblog in which Mr. Wrubel gives his take on a recent Citigroup information release entitled “Foreclosures Gone Wild: Understanding the Legal Issues Surrounding the Recent Foreclosure Freezes and Investigations.”

The information is based on a conference call Citigroup recently hosted, featuring speaker Adam Levitin, an Associate Professor of Law at Georgetown University. Levitin's presentation to the attendees is described to have painted "one of the bleaker portraits" regarding the legal issues surrounding the way mortgage loans have been "sliced & diced," "flipped around," and otherwise kept track of.

Based on the information reported, it appears, in my view, that Citigroup may be beginning the process of 'gently' breaking the news to its investors that they have a serious ("FUBAR") problem with the way mortgage loans have been securitized.


For the Citigroup information, release, see, “Foreclosures Gone Wild: Understanding the Legal Issues Surrounding the Recent Foreclosure Freezes and Investigations.”

Thanks to Deontos .is for the heads-up on the story.

Northern Florida "Rocket Docket" In High Gear As Defenses In Homeowner-Contested Foreclosure Actions Get Flattened & Bulldozed Out Of 'Kangaroo' Court

In Jacksonville, Florida, The Florida Times Union reports:
  • The cases go quickly through the conference room on the fifth floor of the Duval County Courthouse. That's where a special foreclosure court has been set up to hear foreclosures and nothing but. With 15,000 open foreclosure cases in Duval County, it's staffed by retired judges with a goal of resolving 25 cases an hour, leading some critics to label it the "Rocket Docket," and there are harsher descriptions as well.

  • "The fundamental problem," said Chip Parker, an attorney who specializes in foreclosure defense, "is that for the first time, this court was created with the specific goal of reducing foreclosures 62 percent." "If they find for the defendant, the plaintiffs [usually lenders] just refile," he said. "The only way to reduce [the case load] is to give it to the plaintiff. It's designed with a result in mind, and that's not how justice is supposed to work."


  • The court, like other foreclosure courts in Florida, has harsh critics among some of the attorneys who make regular appearances. Parker said that in the three years before the foreclosure court was established, his firm participated in about 100 hearings for a contested final summary judgment and never lost one. With the new court, they are 1-for-15, winning their first last week in Clay County. "For the first time, they're not even pretending to be unbiased arbiters of justice," Parker said.

For more, see "Rocket Docket" rushing foreclosures, lawyers say (Under pressure to move cases quickly Duval circuit's goal is to resolve 25 per hour).

In related stories, see:

Joint Law Enforcement Effort Bags Pair Running Northern California Alleged Loan Modification Racket

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. announced charges [] against two "callous con artists" who took thousands of dollars from dozens of struggling Northern California homeowners for foreclosure services never delivered.


  • Angeline Lisa Lizarrago, 68, of Fremont and Michael Douglas Young, 67, of Los Gatos were scheduled to be arraigned [...] on a 23 count complaint for felony fraud and theft they committed at their business, Avemos Financial Group, of Fremont.(1) If convicted, Lizarrago could face more than 15 years in prison. Young, a licensed real estate broker, faces up to 12 years. The case was investigated and prosecuted jointly by the Attorney General and the Alameda County District Attorney.(2)

  • From June 2008 to October 2009, Lizarrago and Young targeted Spanish-speaking homeowners as well as Southeast Asian immigrants, all desperate to save their homes. People stood in line for hours to get into Avemos's waiting room, which was decorated with shrines to the Virgin Mary.

  • Clients seeking help typically paid $1,500 initially. Lizarrago, the owner of Avemos, and Young, Avemos's general manager, promised they would take steps to stop banks from immediately foreclosing on their homes and renegotiate clients' loans to reflect their homes' current market value. Lizarrago and Young guaranteed a refund if they were unsuccessful. Many lost their homes in foreclosure and did not receive a refund.

  • Lizarrago also took advantage of the foreclosure crisis in another way. She told an 89-year-old man and his wife, who wanted to move away from Stockton, that she owned 51 properties, many of which had been foreclosed upon, and she could find them a home in Fremont. She asked for an up-front fee, which she promised to return with interest once the purchase was made. In a series of payments, the couple gave Lizarrago $25,000. She never found them a home, nor returned their money.


  • Lizarrago was moved to Alameda County jail from Chowchilla State Prison, where she was serving a two-year sentence for a prior real estate scam.(3) Young was arrested September 30.

For the California AG press release, see Attorney General Announces Charges Against Two Con Artists Who Took Money From Struggling East Bay Homeowners.

(1) See People v. Lizarrago, Young for the Walk Warrant and Declaration In Support Of Probable Cause.

(2) The California Department of Real Estate and the Fremont Police Department assisted in the investigation, the press release states.

(3) In his Declaration in Support of Probable Cause, Inspector Patrick Johnson stated the following regarding Lizarrago's earlier escapades:

  • I have determined that Lizarrago, born July 13, 1942, has a substantial criminal record dating back to the 1980's and that she has used more than 20 different names. Under the name Angie Terrasas in 1982 she was sentenced to prison out of Santa Clara County for violations of Penal Code section 476a (NSF checks). In 1983 she was sentenced to prison for the same offense out of Fresno County. She was sentenced to prison again for NSF checks issued In Santa Clara County in 1991. Most recently, on September 30, 2009, Lizarraga was sentenced to state prison for two years from Madera County for six counts of grand theft based on her commission of an advance fee scheme -she was charging people to get them home loans but failed to do so. Additionally, in the mid 1980's, under the name Evangelina Areola Terrasas, Lizarraga was convicted by the United States of alien smuggling.

Cal. AG Tags Forensic Loan Audit Firm, Others w/ $60M Suit; Says Litigation Mill "Littered Courts w/ 100s Of Suits That Have Scant Chance Of Success"

From the Office of the California Attorney General:
  • Attorney General Edmund G. Brown Jr. [] filed a $60 million lawsuit against a pair of Sacramento companies that lured desperate homeowners with a deceptive marketing scheme that promised to obtain mortgage modifications through the use of computer-generated "forensic loan audits."

  • "These defendants dangled the term ‘forensic loan audit' as a sure-fire remedy for the mortgage problems of homeowners in distress," Brown said. "In fact, it was no remedy at all, and hundreds of desperate California homeowners took the bait and lost their money -- and sometimes their homes."

  • Brown filed the $60 million lawsuit against US Loan Auditors, My US Legal Services, and five individuals, including two attorneys, who operate a fraudulent mortgage audit scheme that preys on desperate homeowners anxious to save their homes. The suit demands civil penalties, restitution for victims, and permanent injunctions to keep the companies and other defendants from fraudulently marketing forensic loan audits and legal services of little value.


  • My US Legal Services bilks clients for months, filing cookie-cutter complaints with little or no merit, billing unjustified monthly fees, and then dodging clients' phone calls or stringing them along with false assurances that a settlement is in progress. Hundreds of California homeowners, many of them facing possible loss of their homes, have been duped into paying thousands of dollars to the two companies -- one homeowner paid more than $55,000 -- but received little or no relief.

  • Meanwhile, the litigation mill run by My US Legal Services has littered courts with hundreds of lawsuits that have scant chance of success. Two federal judges have expressed concern about the legitimacy of these lawsuits and have several times sanctioned attorneys involved.

  • In addition to the companies, Brown is suing the three owners: attorney and real estate broker James Sandison, Jeffrey Pulvino, and Shane Barker, as well as two California attorneys, Sharon L. Lapin and Jonathan G. Stein. The State Bar filed disciplinary charges [] against Sandison for alleged misappropriation of clients' funds and aiding the unauthorized practice of law.

For the California AG press release, Brown Files $60 Million Lawsuit Against Fraudulent Forensic Audit Loan Modification Scam.

For the lawsuit, see People v. US Loan Auditors, Inc., et al.

(1) Go here for a sample solicitation entitled "Notice Regarding Predatory Lending Your Immediate Participation Is Requested."

A portion of the solicitation appears to cleverly simulate a government document and resembles IRS Form w-2 or IRS Form 1099, possibly to create the illusion that the source of the mailing is a government agency. The remainder of the solicitation is also designed in a manner that one could reasonably associate with an official government document (although, in the fine print, the outfit conveniently slips in the standard 'we are not a government agency, nor are we affiliated with one' language).

The form of envelope which was allegedly used to send the mailing appears to simulate an envelope that a recipient of which might associate with one coming from a federal government agency, and contains the caption "PREADATORY LENDING INVESTIGATION" as well as the following 'boxed' boilerplate warning:

U.S. CODE TITLE 18, SEC. 1702

For those interested in a piece of Federal consumer protection law historical trivia, use of mailings that are designed to simulate government documents in an attempt by alleged scam artists to con people out of money is a trick that's been around for decades, and, at least when used in the context of bill collection activities by debt collectors, was declared illegal in 1978 by the Fair Debt Collection Practices Act. See U.S. CODE TITLE 15, SEC. 1692(e)(9), which declares the following conduct to be a violation of the FDCPA as an unfair or deceptive practice:

  • The use or distribution of any written communication which simulates or is falsely represented to be a document authorized, issued, or approved by any court, official, or agency of the United States or any State, or which creates a false impression as to its source, authorization, or approval.

"Foreclosure Warranties" May Be Required When Banks Unload Potentially "Crappy-Titled" REOs Onto Unwitting Public

Bloomberg News reports:
  • Title insurers, banks and regulators are in talks to create warranties under which lenders assure they followed proper procedures before selling foreclosed homes, said Kurt Pfotenhauer, head of the insurers’ trade group. “Everyone sort of sees the same risks, and that’s the good part,” Pfotenhauer, chief executive officer of the American Land Title Association, said [] in a telephone interview. “You just have to craft a solution that’s acceptable to all the parties, and we’re making progress.”

For more, see Title Insurers in Talks With Lenders on Foreclosure Warranties.

Thanks to Bill Collins at Frontier Abstract, Rochester, NY for the heads-up on the story.

Tuesday, October 12, 2010

GMAC Hired White-Shoe Firm To Target Maine Attorney For Release Of "Stephan" Deposition???

Mother Jones reports:
  • Is GMAC Mortgage, the company under siege by numerous state attorneys general and members of Congress for its use of dubious foreclosure legal filings, trying to silence the lawyer who exposed the bank's practices? So says Thomas Cox, the Maine attorney whose case is at the center of GMAC's ongoing debacle.


  • Cox had solicited help from other NACA attorneys before. Now he was returning the favor. Before long, the deposition went public on a foreclosure defense blog written by a St. Petersburg, Florida-based attorney who dubbed Stephan the "New Robo Signer." (In October, the Stephan deposition formed the basis of a major class action against GMAC filed by five Maine homeowners and represented by Cox, the National Consumer Law Center, and the Center for Responsible Lending.)

  • Then, in mid-June, Cox says, something odd happened. GMAC fired the local attorney who'd handled the case up to that point and replaced her with counsel from a powerful white-shoe firm, Pierce Atwood. The new firm's first move was to accuse Cox of violating Maine civil court rules by distributing legal documents that caused "embarrassment, annoyance, oppression, and intimidation" of GMAC and Stephan. (GMAC's attorneys say Cox sent the deposition directly to the Florida blog, which he denies.)

  • The firm demanded financial sanctions against Cox totaling thousands of dollars. And it asked the court to make Cox retrieve the deposition from blogs and website, effectively yanking it off the Internet, and prevent him from further sharing the deposition or using it in any other GMAC-related cases. Cox fired back by saying he had every right to share the deposition. Blocking his use of the document violated his First Amendment rights, he argued.

For more, see Did GMAC Try to Bury Its Foreclosure Smoking Gun? (The deposition the lender really, really doesn't want you to see).

Standing-Lacking Lenders To Bring In The 'White Shoes' To 'Pinch-Hit' In Effort To Clean Up Mess Created By Sloppy F'closure Mills In Contested Cases?

The Am Law Daily reports on an apparent move by standing-lacking lenders to roll out the white-shoe law firms to take over foreclosure actions in contested cases:
  • [A] review of state and federal cases filed in the last few weeks shows lenders are turning away from the "foreclosure mills" and to large law firms when homeowners fight foreclosure and challenge banks to prove their documents are legit. In Florida alone, the following law firms have popped in contentious foreclosure cases in which judges have ruled homeowners might be onto something: Morgan, Lewis & Bockius, Greenberg Traurig, Akerman Senterfitt, and Gray Robinson.

For more, see When Foreclosure Cases Get Tough, Big Firm Lawyers Step In.

Boiler Rooms and Foreclosure Mills: A Brief History of America's Mortgage Industry

Michael Hudson, staff writer with a nonprofit journalism organization, The Center for Public Integrity, writes in The Huffington Post:

  • A former employee with one of the nation's largest lenders testifies that he signed off on 400 foreclosure documents a day without reading them or verifying the information in them was correct.

  • Shocking stuff. But surprising? Not for anyone who's been tracking the recent history of the mortgage machine. Just about every corner of America's mortgage industry has been blemished by significant levels of fraud over the past decade.

For more, see Boiler Rooms and Foreclosure Mills: A Brief History of America's Mortgage Industry.

What Is A Note & Why Is It So Important?

Mike Konczal writes in his blog, Rortybomb:
  • The [Service Employees International Union] has a campaign: Where’s the Note? Demand to see your mortgage note. It’s worth checking out. But first, what is this note? And why would its existence be important to struggling homeowners, homeowners in foreclosure, and investors in mortgage backed securities?

  • There’s going to be a campaign to convince you that having the note correctly filed and produced isn’t that important (see, to start, this WSJ editorial from the weekend). This is like some sort of useless cover sheet for a TPS form that someone forgot to fill out.(1) That is profoundly incorrect.

  • Independent of the fraud that was committed on our courts, the current crisis is important because the note is a crucial document for every party to a mortgage. But first, let’s define what a mortgage is.

For more, see Foreclosure Fraud For Dummies, 2: What is a Note, and Why is it So Important?

See also:

(1) Equally important as the basic promissory note itself is any addendum, or allonge, that is supposed to be "firmly affixed" to, and constitutes an integral part of, the note itself (but quite frequently seems to be missing - whether sitting in a different file, or possibly floating around in a different part of the country - in these faulty foreclosure cases).

For what may be a helpful discussion on allonges, the importance that they be "firmly affixed" to the note, and related points, see the following excerpt from Adams v. Madison Realty & Development, Inc., 853 F.2d 163, (3rd Cir, 1988) (paragraphs 22-39) ("Code" is a reference to the Uniform Commercial Code) (bold text is my emphasis, not in the original text):

  • 22) The Code defines a holder as one "who is in possession of ... an instrument ... drawn, issued or indorsed to him or to his order." U.C.C. Sec. 1-201(20). Mere ownership or possession of a note is insufficient to qualify an individual as a "holder." The instrument must be obtained through a process the Code terms "negotiation," defined as "the transfer of an instrument in such form that the transferee becomes a holder." U.C.C. Sec. 3-202(1). If the instrument is payable to order--as is the case with the notes here--negotiation is accomplished "by delivery with any necessary indorsement." Id.

    In explaining the requirement that the indorsement be on or firmly affixed to the instrument, the Official Comment states that the Code "follows decisions holding that a purported indorsement on a mortgage or other separate paper pinned or clipped to an instrument is not sufficient for negotiation. The indorsement must be on the instrument itself or on a paper intended for the purpose which is so firmly affixed to the instrument as to become an extension or part of it. Such a paper is called an allonge." U.C.C. Sec. 3-202 Official Code Comment (3).

    24) We may assume, without actually deciding, that the loose indorsement sheets accompanying Empire's notes would have been valid allonges had they been stapled or glued to the notes themselves. Cf. All American Finance Co. v. Pugh Shows, Inc., 30 Ohio St.3d 130, 507 N.E.2d 1134, 1136-37 n. 3 (1987) (collecting cases showing disagreement among courts on how firmly indorsements must be affixed). Nevertheless, the fact remains that the indorsement sheets here were not physically attached to the instruments in any way, and thus patently fail to comply with the explicit Code prerequisite. Conceding the requirement's formalistic nature, we explore the arguments in support of its enforcement here.

    25) The Code's requirement that an indorsement be "firmly affixed" to its instrument is a settled feature of commercial law, adopted verbatim by every American state, the District of Columbia, and the Virgin Islands. See 5 R. Anderson, Uniform Commercial Code Sec. 3-202:2, at 416 (3d ed. 1984) (citing codifications). With a unanimity unusual in decisional law, the directive has been faithfully observed.3

    26) The historical origins of the provision have been chronicled to the days of the Law Merchant. See Pribus v. Bush, 118 Cal.App.3d 1003, 173 Cal.Rptr. 747, 749 (1981). The practice of multiple indorsements which accompanied the growth in commerce eventually led to acceptance of the use of allonges. See id.; Estrada v. River Oaks Bank & Trust Co., 550 S.W.2d 719, 725 (Tex.Civ.App.--Houston [14th Dist.] 1977, writ ref'd n.r.e.). Even today, however, numerous jurisdictions permit allonges only where, because of multiple indorsements, no additional space for signatures remains on the negotiable instrument. See, e.g., Pribus, 173 Cal.Rptr. at 751; Tallahassee Bank & Trust Co. v. Raines, 125 Ga.App. 263, 187 S.E.2d 320, 321 (1972). But see Crosby v. Roub, 16 Wis. 616, 626-27 (1863) (allonge permitted even where space remains on note).

    27) When the drafters of the Uniform Commercial Code replaced the term "attached" in the NIL with the phrase "firmly affixed," they intended to make the use of allonges more difficult. See Hills v. Gardiner Savings Institution, 309 A.2d 877, 880-81 (Me.1973); Estrada, 550 S.W.2d at 728; 5 Anderson, supra, Sec. 3-202:05. Courts have advanced two justifications for the firmly-affixed requirement. The California Court of Appeals reasoned that the provision serves to prevent fraud, remarking that a signature innocently placed upon an innocuous sheet of paper could be fraudulently attached to a negotiable instrument in order to simulate an indorsement. Pribus, 173 Cal.Rptr. at 750. But cf. Lamson v. Commercial Credit Corp., 187 Colo. 382, 531 P.2d 966, 968 (1975) (allonge consisting of two legal sheets stapled to two small checks held valid because signing on checks themselves would have been impossible; "stapling is the modern equivalent of gluing or pasting").

    28) The affixation requirement has also been cited for its utility in preserving a traceable chain of title, thus furthering the Code's goal of free and unimpeded negotiability of instruments. Nearly a century ago, the Supreme Court of Georgia declared it "indispensably necessary" that negotiable instruments "should carry within them the indicia by which their ownership is to be determined; otherwise, their value as a circulating medium would be largely curtailed, if not entirely destroyed." Haug v. Riley, 101 Ga. 372, 29 S.E. 44, 46 (1897). See also Crosby, 16 Wis. at 627 (permanently attached indorsements to instrument "travel with it wherever it might go"). Chancellor Hawkland writes that it would be "unreasonable to impose upon the indorsee the risk that the present holder or a prior holder had negotiated the instrument to someone not in the apparent chain of title by virtue of a separate document." 4 W. Hawkland & L. Lawrence, Uniform Commercial Code Series Sec. 3-202:05 (1984).

    29) Defendant here argues that these considerations warrant enforcement of the requirement only against those persons who acquire the notes after issuance, not against the makers who undertook to repay the amount loaned by the bank. This argument overlooks the rights which pass to an indorsee. Through effective negotiation, the indorsee becomes a holder, acquiring the authority to discharge the obligation on the note by accepting payment. See U.C.C. Sec. 3-301. Until the maker pays a holder, he will not be discharged from his obligation. Thus, "if the primary party pays an instrument bearing an improper indorsement, he will not have paid a holder, and the true owner of the instrument may recover against the primary party." See 1 R. Aldermann, A Transactional Guide to the Uniform Commercial Code 633 n. 294 (2d ed. 1983).

    30) From the maker's standpoint, therefore, it becomes essential to establish that the person who demands payment of a negotiable note, or to whom payment is made, is the duly qualified holder. Otherwise, the obligor is exposed to the risk of double payment, or at least to the expense of litigation incurred to prevent duplicative satisfaction of the instrument. These risks provide makers with a recognizable interest in demanding proof of the chain of title. Consequently, plaintiffs here, as makers of the notes, may properly press defendant to establish its holder status.

    31) Plaintiffs have another reason for insisting on compliance with the Code's indorsement requirements. They allege their notes were procured by fraud and they wish to assert that as a defense to payment. As the Code provisions have been interpreted, however, the defense of fraud in the inducement is not available against holders in due course. See 6 Anderson, supra, Sec. 3-305:62. Thus, if Empire successfully establishes its status as a holder in due course, it will be able to expeditiously fend off the plaintiffs' fraud allegations and obtain a judgment on the notes.

    32) Notwithstanding these concerns, defendant maintains that mere "clerical oversight" should not obscure its right to recover as a holder in due course on notes it purchased for value. There is some equitable appeal to this line of reasoning, but overriding considerations militate against it.

    33) We must be mindful of the limitations imposed on federal courts sitting in diversity. Where an appeal to this court challenges an application of state law, we are not free to indulge our preferences as to how the common law should best develop. Falcone v. Columbia Pictures Indus., 805 F.2d 115, 118 (3d Cir.1986). When, as here, no controlling state case law guides our consideration, we are left to the "unenviable task" of predicting how the highest courts of Connecticut, New Hampshire, and New Jersey would rule were the question now before them--a review decried as "omniscient in a way that is not possible for mortals." Santiago v. Johnson Mach. & Press Corp., 834 F.2d 84, 84 (3d Cir.1987).

    34) Fortunately, our review in this case does not demand such clairvoyance. When interpreting the attachment requirement, the courts "have been of one mind" that the lack of an indorsing signature on the instrument itself, or on a sheet "firmly affixed" to the instrument, is fatal to holdership. See, e.g., Bailey v. Mills, 257 Ala. 239, 58 So.2d 446, 447 (1952); Lopez v. Puzina, 239 Cal.App.2d 708, 49 Cal.Rptr. 122, 124-25 (1966); Lamson, 531 P.2d at 968; Shepherd Mall State Bank v. Johnson, 603 P.2d 1115, 1118 (Okla.1979); Estrada, 550 S.W.2d at 725; Crossland Sav. Bank FSB v. Constant, 737 S.W.2d 19 (Tex.Ct.App.--Corpus Christi 1987); Crosby, 16 Wis. at 627. As one treatise states, "[t]he unanimity of the courts in cases where the signature is separate from the instrument can be explained by a judicial perception that it is sound policy to require the indorsement to be on the instrument." R. Hillman, J. McDonnell, & S. Nickles, Common Law and Equity Under the Uniform Commercial Code p 11.02[b], at 11-18 (1985).

    35) Where the state courts, the scholarly commentators, and the unambiguous language of the statute all admit of but one result, only an overwhelming equitable ground would warrant a departure from what is unquestionably settled law. Absent such a circumstance, the Code's express goal of national uniformity must prevail. See U.C.C. Sec. 1-102(2).

    36) One premise underlying the defendant's position on appeal is that plaintiff makers, once they give up possession of the instruments, lack standing to contest subsequent developments occurring in the course of later negotiations. Yet, as we have seen, the obligors have a very real interest in determining whether the person demanding payment on the note is actually a holder.

    37) The defendant's attempt to distinguish the district court's holding from the great weight of contrary precedent is similarly unpersuasive. Defendant argues that its indorsement sheets serve no collateral purpose other than to negotiate the notes, and that section 3-202(2) was intended only to prevent giving legal effect to purported indorsements contained in collateral purpose documents--such as mortgages and guaranties. This contention has been rejected by courts that have denied holder status to transferees relying on plain, unattached indorsement sheets. See Pribus, 173 Cal.Rptr. at 748; Duxbury v. Roberts, 388 Mass. 385, 446 N.E.2d 401, 403 (1983). Moreover, the same goals prompting adoption of the provision--prevention of fraud and ensuring an attached chain of title record--are equally served in applying the requirement here.

    38) Empire is not in a strong position to justify equitable relaxation of a settled formality in the Code. That longstanding provision was enacted, after all, for the benefit of parties in Empire's position, commercial sophisticates that trade in the secondary market for negotiable instruments.4 The provision is not ambiguous, nor can Empire assert excusable ignorance of an unusual local technicality, given the rule's universal application. The flaws in the notes should have been perceived quickly and readily cured. Instead, the record suggests that the failure to observe that Code formality was caused by nothing short of sheer carelessness.

    39) Financial institutions, noted for insisting on their customers' compliance with numerous ritualistic formalities, are not sympathetic petitioners in urging relaxation of an elementary business practice. It is a tenet of commercial law that "[h]oldership and the potential for becoming holders in due course should only be accorded to transferees that observe the historic protocol." Hillman, McDonnell, & Nickles, supra, at p 11.02[b], at 11-17. In sum, we are not persuaded that defendant presents a credible case for nonapplication of the plain wording of the state statutes.


For a couple of recent cases decided in the borrower's favor that involved problems with "rogue" allonges, see:

Florida AG Seeks Rehearing In Foreclosure Mill Probe; Earlier Court Ruling Quashed Subpoena Served On Law Firm

In West Palm Beach, Florida, The Palm Beach Post reports:
  • Florida's attorney general wants a Palm Beach County judge to reconsider his ruling last week prohibiting it from investigating one of the state's large foreclosure law firms. The request for a new ruling or a rehearing in front of Judge Jack S. Cox was made Monday, one week after Cox quashed an attorney general's subpoena seeking information from the Shapiro & Fishman law firm into its foreclosure practices.

  • In his ruling, Cox said it was the Florida Bar's responsibility to investigate misconduct at law firms, not the attorney general's office. But in its request for rehearing, the office included an affidavit from the Florida Bar's director of lawyer regulation in which he says only individual attorneys can be investigated by the Bar, not entire firms.

For more, see Florida attorney general seeks rehearing in foreclosure investigation.

Monday, October 11, 2010

CNN Interviews Central Florida Woman Victimized By Illegal Lock-Out Of Her Home By JPMorgan Chase

CNN's American Morning recently interviewed the Central Florida homeowner who suffered through a horrifying experience with someone breaking into her home, only to learn that the perpetrator was actually someone hired by JPMorgan Chase to change the locks to her home:
  • Nancy Jacobini was home alone in Florida when she heard what she thought was an intruder at the front door. There was no knock. She wasn't expecting anyone, so she grabbed her cell phone and called 911.

  • As it turns out, the man who broke the lock on her front door was actually a contractor hired by her bank. It is a procedure typically used to secure a foreclosed home. However, Jacobini's home wasn't foreclosed. She tells American Morning's Kiran Chetry how terrifying the experience was for her.

For more, see Bank breaks into home - over mortgage payments (A woman says her bank hired someone to break in and change the locks even though her home was not in foreclosure) (go here for the video of the interview).

Thanks to Mike Dillon of for the heads-up on the interview.

State AGs To Band Together In Joint Probe Into Banks' Use Of Sloppy Paperwork In Foreclosure Actions

The Associated Press reports:
  • The attorneys general of up to 40 states plan to announce soon a joint investigation into banks' use of flawed foreclosure paperwork. A person briefed on the investigation said Saturday night that an announcement could come as early as Tuesday. The person spoke on condition of anonymity because the investigation was not yet public. Iowa Attorney General Tom Miller will lead the investigation. Miller already has been leading multistate reviews of questionable foreclosure documents.

For more, see Up to 40 states plan inquiry into foreclosure data.

Massachusetts High Court Hears Arguments In 'Ibanez' Case That Threatens To Open The Door To Voiding Thousands Of State Foreclosures

In Boston, Massachusetts, the Boston Herald reports:
  • Banks went nuts during the housing boom, so the state’s top court should uphold a ruling that potentially undoes the wave of foreclosures that followed, a pro-consumer lawyer says. “This industry was insane in its underwriting practices and its foreclosure practices,” attorney Paul Collier told the Supreme Judicial Court [last week]. “There are (liability) costs to that (behavior).”

  • The SJC is debating whether to uphold a 2009 Massachusetts Land Court decision(1) that voided two foreclosures - and opens the door to invalidating thousands more. The lower court ruled that Wells Fargo and U.S. Bank each seized a Bay State home without paperwork proving they really owned the properties’ mortgages.

  • The decision, known as the Ibanez ruling, centers on the way that banks trade mortgages back and forth like stocks these days. Under Massachusetts law, lenders must generate specific transfer documents every time a loan changes hands. Failure to do so can call into question who really owns the mortgage - and who has the right to foreclose.

  • Bank lawyer Robert Allensworth told the SJC that, while his clients used blank documents to transfer ownership of the mortgages in question, later paperwork proved they legally owned the loans. But Collier said the “ludicrous” paperwork that Allensworth cited included marketing sheets used to attract investors to a block of mortgages that included one of the Massachusetts loans.

  • SJC members, who are expected to take months to rule in the case, wondered how upholding the lower court’s decision would affect consumers who’ve bought foreclosed homes from banks. Experts say such homeowners would have to go to court to “cure” title problems before they could sell or refinance properties. “Given the extraordinary sloppiness that accompanied (the industry’s trading) of mortgages, there could be hundreds of thousands or maybe more of (problem) mortgages,” Justice Ralph Gants said.(2)(3)(4)

Source: Lawyer: ‘Insane’ foreclosures should be undone.

Go here to view oral argument (with Windows Media Player) and go here for the Case Docket.

(1) There were actually two rulings issued by Massachusetts Land Court Judge Keith C. Long:

(2) For earlier posts on this case, see:

(3) For the legal briefs filed in this case, see:

(4) It should be noted that, as far back as a year and a half ago in the Massachusetts Land Court decision in Ibanez #1, Judge Long foreshadowed the "crappy title" problem related to faulty foreclosures that has only recently garnered much attention, in the following excerpt (footnotes contained in the original text have been omitted here for ease of reading; bold text is my emphasis, not in the original text):

  • As even a cursory glance at the current caseload of this court reveals, titles arising from mortgage foreclosures can have many problems. These include the most fundamental: Did the party conducting the foreclosure have the authority to do so and, if challenged, can it prove that it had such authority? In short, will a purchaser at the foreclosure sale get good title and will get it in prompt fashion? These are increasingly important questions in the current deteriorating real estate market and are not small concerns. It is increasingly rare for a mortgage to remain with its originating lender. Often, as here, mortgages are assigned to other entities, and then assigned yet again into large securitized pools. Often, as here, the paperwork lags far behind. Sometimes mistakes are made. Mistakes can only be corrected, if at all, through confirmatory documents (which the borrower may not so easily agree to) or litigation. With so many foreclosed properties available for purchase, why bid on a property with even the possibility for such trouble? Why bid on a property when the foreclosing party cannot produce all the documents (including proper mortgage assignments in recordable form) that would give good title? Why take the risk that the foreclosing party will be able to produce the documents promptly after the auction takes place, that those documents will be complete and in proper form, or even (in this era of failed and failing institutions) that the foreclosing party will still be in existence, with intact files and knowledgeable employees able to find those files so that the proper paperwork can be completed? Since these concerns affect the ability to obtain clear, marketable title, why bid a reasonable market value instead of a discount price to account for that risk?

  • None of this is the fault of the mortgagor, yet the mortgagor suffers due to fewer (or no) bids in competition with the foreclosing institution. Only the foreclosing party is advantaged by the clouded title at the time of auction. It can bid a lower price, hold the property in inventory, and put together the proper documents at any time it chooses. And who can say that problems won't be encountered during this process? It is interesting that it took the plaintiff (the foreclosing party and successful bidder) almost fourteen months after the auction to obtain its assignment in Ibanez and ten months after the auction in Larace. Would any reasonable third-party bidder have been willing to wait that long, trusting that no other issues would arise? Only in Rosario was the assignment (showing that the foreclosing party held the mortgage and could convey title as a result of the sale) in hand and ready for recording at the time of the auction sale.