Many people look at the foreclosure crisis in one of two ways:
Distressed homeowners, unable to make their mortgage payments and facing foreclosure, should now face the reality of having made a poor borrowing decision.
But prior to the crisis, mortgage lenders were all too happy to make subprime loans, and banks packaged these loans into investments that were bought and sold with little regard to the risk of default.
Whether you agree or not, one thing is clear: the banks and mortgage companies continue to push home foreclosures. And many are breaking the law in the process.
Short history of mortgage-backed investments
Florida has been hit particularly hard with foreclosures. Responding to reports of fraud, the Florida Office of the Attorney General (the "AG") published the results of its recent investigation, presented in straightforward PowerPoint format. This is a MUST READ presentation that will set your blood to boiling when you see the hard evidence of fraud and abuse perpetrated by several lenders.
Once upon a time, bankers locked mortgage notes in vaults, and there they stayed while homeowners made their mortgage payments. Then came the Great Depression. In response, the government created the Federal National Mortgage Association (Fannie Mae). Fannie Mae created a secondary market for mortgages, freeing lenders to make more loans to stimulate the housing market.
Then, in 1960, the market evolved. Lawmakers created real estate investment trusts (REITs), which function like mutual funds. In 1977, Bank of America created the first private mortgage-backed security. Fannie Mae followed suit in 1981, and mortgage-backed securities continued to take different shapes and sizes to the present day.
A tricky one: collateralized debt obligations
Collateralized debt obligations (CDOs) are made of pools of bonds and other assets like subprime mortgage notes. A typical CDO is made of thousands upon thousands of mortgages that are sliced up and separated and grouped. CDOs are then classified in terms of risk. But it's next to impossible to understand that risk. Imagine trying to understand a 15,000-page prospectus representing just one CDO.
In the words of Warren Buffett: "It can't be done."
As a result, CDOs made terrible investments. Thousands of homeowners have gone into default, and many of the same banks and mortgage companies that dealt in CDOs want to foreclose. But foreclosure is difficult without original mortgage documents, such as assignments of mortgage, which are necessary to starting foreclosure proceedings.
So the banks and mortgage companies found a work-around.
From so-called "robo-signers" (those who don't know anything about the documents they sign) to sham witnesses and notaries, they're doing everything possible to keep the foreclosure machine humming along — in the midst of the worst economic downturn since the Great Depression.
Who is Linda Green?
On paper, the industrious Linda Green has somehow managed to rise to the level of vice president at more than 14 different entities, including American Home Mortgage Servicing, Citi Residential Lending and Wells Fargo. According to the Florida AG, Green's forged signature is on hundreds of thousands of mortgage assignments. The fraud is clear since each of these signatures is different from the next.
In addition to Green, there's no shortage of misdeeds when it comes to mortgage assignments:
- Forgery: the signatures of Scott Anderson, Tywanna Thomas and Jessica Ohde all appear to have been forged
- Fiction: names on documents include "Bogus Assignee" and "A Bad Bene"
- Science fiction: documents have effective dates of 9999, roughly 8 millennia from now
And two infamous business failures of the Great Recession, IndyMac and Lehman Brothers, both recently executed mortgage assignments despite the fact that they failed more than two years ago.
IndyMac Bank, the seventh largest mortgage loan originator in the U.S. prior to its failure on July 11, 2008, somehow executed an assignment on July 12, 2010. IndyMac is understood to have failed precisely because it dealt in risky securitized mortgages.
And Lehman Brothers — having filed the largest bankruptcy in U.S. history on September 15, 2008 — also executed an assignment on July 22, 2010, like a ghost from the past.
The notary's function
A notary public functions in part as an official who authenticates the signing of a document. In other words, the notary's stamp and signature is an official declaration that the other signatures on the document are true signatures, not forgeries. Generally, a notary public directly observes the person who signs a document and verifies that person's identity, thus certifying that the document is legal and authentic.
The following is testimony from the deposition of paralegal Tammie Kapusta, former employee of a law firm with clients in the mortgage industry, as published by the Florida AG:
- Q: Would these notaries be there watching [...] as she signed?
- A: No.
- Q: She would just sit there and sign stacks of them?
- A: Correct. As far as notaries go in the firm I don't think any notary actually used their own notary stamp. The team used them.
- Q: There were just stamps around?
- A: Yes.
- Q: And you actually saw that?
- A: I was part of that.
Kapusta's testimony illustrates the problem: mortgage companies appear comfortable using any method at their disposal — even outright fraud — to push lawsuits through the courts with falsified documents so that they can foreclose on struggling homeowners.
And, so far, they've gotten away with it.
This in a time when, according to the National Consumer Law Center, the pace of foreclosures continues unabated: "Despite government efforts to encourage modifications through the Home Affordable Modification Program, too often [mortgage companies] have found it more profitable to foreclose than to offer loan modifications that would benefit homeowners and investors."
It's not hard to see why.
We encourage you to make your own decision as to whether foreclosure fraud was committed in Florida by viewing the Florida AG's PowerPoint presentation. If you agree that the evidence is clear in Florida, do you have any doubts as to it happening in California or anywhere else? Contact the Sobti Law Group for a consultation about stopping foreclosure through a comprehensive audit.