From the September, 2011 PAPER SOURCE JOURNAL. For information on subscribing, click on the tab "Paper Source Journal"
at the top of this page.
92%.
That's the percentage of recent New York City area foreclosures in which the alleged
creditors could not prove they were owed anything.
The New York Post found that in nearly all of the foreclosure proceedings in the past 12
months, “banks have attempted to steamroll their way over sometimes-outgunned homeowners,”
booting them out of their homes even if they didn't have proper documentation that gave them the
right to do so.”
Post investigators “...unearthed claims riddled with robosigners, suspicious documents and
outrageous fees. And in a stunning 37 out of 40 cases, The Post discovered a broken chain of title
from the original lenders to the companies now making claims for the properties — and
thousands in questionable fees.”
In other words, the bank or mortgage servicer filing the claim failed to prove it has any
right at all to make a claim that it was owed the debt or that it could seize the home in question.
The Post also reviewed records in five states —
Florida, Massachusetts, New York, North and South Carolina — and found that at least five
lenders or servicers have filed “questionable” paperwork in recent months. Those five are:
OneWest, Bank of America, HSBC Bank USA, Wells Fargo and GMAC Mortgage.
The Sarbanes-Oxley Act makes filing false documents in a bankruptcy case, including
foreclosures, a crime punishable by up to 20 years in prison. Preparing fraudulent documents can
be also prosecuted under federal mail fraud statutes.
The problem stems from the way mortgage loans have been packaged into huge pools,
sliced and diced mixing good loans with toxic ones, then made into
securities and sold to investors all over the world. In many if not most cases the paperwork
establishing chain of title for the underlying properties didn’t follow the securities.
The lenders that made the mortgage loans had no incentive to make sure the borrowers
were solvent, since they profited from selling the securities rather than from the borrowers
making payments. Their incentive was to make as many loans as possible in order to sell as
many as possible. That meant finding as many new borrowers as possible, which meant turning
over rocks to find borrowers that ordinarily the banks wouldn’t let in the door. Thus they had to
come up with schemes such as low-doc and no-doc loans, stipulated incomes (the borrowers tell
the lenders how much they make and the lenders pretend to believe them) and even stipulated
credit scores — yes, borrowers give the lenders a number they claim is their credit score and the
lenders don’t bother to check — they don’t WANT to check.
Kai Wright wrote in the Nation, "everybody involved in the securities process had cut so
many corners in pursuit of record profits, had operated with such disregard for the many steps
that ensure a safe and sound mortgage market, that they couldn't even show who owned the
debt.”
Robosigning continues to be a huge problem in foreclosure cases like the ones the Post
found, not just in New York but around the country. Robosigners are individuals at banks whose
signatures turned up on thousands of foreclosure documents, in some cases prompting questions
of whether multiple people were signing under the same name.
Some of the problems the New York Post found include missing or questionable
endorsements of notes, mortgage assignments by companies that were no longer in existence at
the date of the assignment, proof-of-claim filings without legal documentation of the servicer's
right to do so, assignments created after the debtor filed for bankruptcy (which is illegal) and, of
course, robosigning.
