Foreclosure - Impressive!

Foreclosure - Impressive! by joelogon

Shahien Nasiripour’s latest on the foreclosure fraud settlement asserts that mortgage servicers expect to pay up to $20 billion to settle legal claims from state and federal regulators. They apparently have gotten the message that the fraud allegations are serious enough to rise to this standard. But the talks have not ironed out how much liability the banks would receive in exchange for this penalty, as well as where that $20 billion will go (loan modifications or simply penalties back to the US Treasury) and what the enforcement mechanism would be in the wake of an agreement.

I’ve lost sight of why we’re still having this conversation. Multiple state Attorneys General have essentially abandoned these negotiations by either denying the existence of a problem (on the right) or undertaking their own mortgage fraud investigations and subpoenas of documents (like the AGs of New York, Illinois, California and several other states). I understand why the banks want a quick solution now: the housing market shows no sign of coming back, and each individual revelation has provided a hit to their bottom line. Stock prices of US banks are particularly low at this point. But I don’t see why the regulators should be in such a hurry to indemnify them, and indeed it doesn’t look like they are.

This is especially true given the evidence obtained by reporter Abigail Field, showing securitization fraud much more widespread that the industry admits. Only now are we beginning to get the investigations showing the extent of the problems, between Field’s findings, the subpoenas and spade work from state AGs, the HUD Inspector General report showing that the banks filed false claims to recoup government-funded insurance on FHA loans, and the recent discoveries from county registers of deeds. One register, Jeff Thigpen of Guilford County, North Carolina, looked through the records in his office and found thousands of instances of fraudulent documents and forged signatures. Another register, John O’Brien of the Southern Essex District in Massachusetts, has decided to reject all robo-signed records coming into his office, forcing the entities wishing to foreclosure under his jurisdiction to file separate forms. Thigpen has backed up O’Brien on this announcement. Here’s the press release.

Saying “the buck stops here” Massachusetts Southern Essex District Register of Deeds, John O’Brien, today rejected 2 robo-signed documents submitted to his Registry for recording and plans to continue doing so. “My Registry will not be a knowing participant in this fraud against homeowners. From today forward, lenders be on notice, the Southern Essex District Registry of Deeds will not record robo-signed documents.” (continued)…

The rejected documents containthe signatures of three known robo-signers, Linda Green, Korell Harp and Linda Burton. According to O’Brien, in his Registry he has 22 different variations of Linda Green’s signature and 5 different variations between Korell Harp and Linda Burton. “I find this practice very troubling on many levels. It has completely jaded my understanding that a notarized document was something that could be relied upon.” stated O’Brien. In Massachusetts, notaries must take an oath of office, under the pains and penalties of perjury. “If these documents are signed by anyone other than the noted signatories, these notaries and those that employed them should be held accountable for the fraudulent documents that they have produced and the havoc they have caused to chains of title everywhere.”

Register O’Brien said, “Knowing what I now know, it would be a dereliction of my duties as the keeper of the records to record these documents and any other documents that contain questionable signatures. To do so, would make me a willing participant in a continuing scheme which has corrupted the chain of title of thousands of Essex County property owners. I have decided to put a stop to this reckless behavior and hold these lenders and their agents accountable for the authenticity of what they are attempting to record in my Registry. I do not believe this to be unreasonable.”

I have no idea if this will catch on; so far O’Brien and Thigpen seem to be leading the way. But think about what would happen if all registers of deeds simply rejected fraudulent documents, which after all falls under their prescribed duties. This would be a revolt against the corruption of the land recording system that the banks perpetuated. And it would severely hamper their ability to foreclose, since the document fraud for the most part covers up the much deeper problem uncovered by Abigail Field, that banks messed up the securitization process and broke the chain of title on millions of properties.

Why in the world, then, are we discussing a settlement at this point, and not going to every register in the country and looking at the physical evidence they hold?