Archive for 'loans'

This keeps getting uglier and uglier. I’m not trying to promote "doom and gloom" so don’t shoot the messenger. My objective is to keep  you on top of today’s insane turbulent real estate market.

"He Who Masters The New Rules Firstest, WINS The MOSTEST"

 

 

Foreclosure Furor Rises; Many Call for a Freeze

By DAVID STREITFELD and GRETCHEN MORGENSON
Published: October 5, 2010
 
The uproar over bad conduct by mortgage lenders intensified Tuesday, as lawmakers in Washington requested a federal investigation and the attorney general in Texas joined a chorus of state law enforcement figures calling for freezes on all foreclosures.
 
Flawed Paperwork Aggravates a Foreclosure Crisis (October 4, 2010)
 
Representative Nancy Pelosi, the House speaker, and 30 other Democratic representatives from California told the Justice Department, the Federal Reserve and the comptroller of the currency that “it is time that banks are held accountable for their practices.”
 
In a request for an investigation into questionable foreclosure practices by lenders, the lawmakers said that “the excuses we have heard from financial institutions are simply not credible."
 
Officials from the federal agencies declined to comment.
 
Texas Attorney General Greg Abbott, a Republican, sent letters to 30 lenders demanding they stop foreclosures, evictions and the sale of foreclosed properties until they could provide assurances that they were proceeding legally.
 
Both developments indicated that scarcely two weeks after the country’s fourth-biggest lender, GMAC Mortgage, revealed that it was suspending all foreclosures in the 23 states where the process requires judicial approval, concerns about flawed foreclosures had mushroomed into a nationwide problem.
 
Some of the finger-pointing was also being directed back at Congress. The Ohio secretary of state, Jennifer Brunner, suggested in a telephone interview on Tuesday that a bill passed by Congress last week about notarizations could facilitate foreclosure fraud.
 
Dubious notary practices used by banks to justify foreclosures have come under scrutiny in recent weeks as GMAC and other top lenders suspended homeowner evictions over possible improper procedures.
 
Ms. Brunner, who has recently referred possible cases of notary fraud in her state to federal authorities, worries that the legislation would allow the lowest standard for notaries to become a nationwide practice. She said she also worried that the changes were coming in the middle of a foreclosure storm where people could lose their homes improperly.
 
“A notary’s signature is that of a trusted, impartial third party, whose notarization bolsters the integrity of the document,” Ms. Brunner said. “To take away the safeguards of notarization means foreclosure procedures could be more susceptible to fraud.”
 
As banks’ foreclosure practices have come under the microscope, problems with notarizations on mortgage assignments have emerged. These documents transfer the ownership of the underlying note from one institution to another and are required for foreclosures to proceed.
 
In some cases, the notarizations predated the preparation of the legal documents, suggesting that signatures were not reviewed by a notary. Other notarizations took place in offices far away from where the documents were signed, indicating that the notaries might not have witnessed the signings as the law required.
 
Notary practices vary from state to state and the bill, sponsored by Representative Robert B. Aderholt, a Republican from Alabama, would essentially require that one state’s rules be accepted by others. If one state allows its notaries to sign off on electronic signatures, for example, documents carrying such signatures and notarized by officials in that state would have to be recognized and accepted in any state or federal court.
 
Ms. Brunner pointed out that some states had adopted “electronic notarization” laws that ignored the requirement of a signer’s personal appearance before a notary. “Many of these policies for electronic notarization are driven by technology rather than by principle, and they are dangerous to consumers,” she said.
 
Mr. Aderholt had introduced the bill twice before and both times it passed the House of Representatives but not the Senate. Mr. Aderholt reintroduced the bill last October and it passed the Senate on Sept. 29. It is awaiting President Obama’s signature.
 
Mr. Aderholt’s press secretary, Darrell Jordan, said there was no connection between the timing of the bill and the current notarization problems with foreclosures. In a statement announcing the bill’s passage, Mr. Aderholt said: “This legislation will help businesses around the nation by eliminating the confusion which arises when states refuse to acknowledge the integrity of documents notarized out of state.”
 
Last week, JPMorgan Chase and Bank of America joined GMAC in suspending foreclosures in the states where they must be approved by a judge. The judicial states do not include California or Texas. But Mr. Abbott, the Texas attorney general, told lenders in letters dated Oct. 4 that if they used so-called robo-signers — employees who signed thousands of foreclosure affidavits a month, falsely attesting that they had reviewed the material — it would be a violation of Texas law.
 
As a result, he wrote, “the document and therefore the foreclosure sale would have been invalid.”
 
The three lenders who are at the center of the controversy, GMAC Mortgage, JPMorgan Chase and Bank of America, declined to comment. Other lenders singled out by Mr. Abbott include Wells Fargo, CitiMortgage, HSBC and National City.
 
Meanwhile, shares of a major foreclosure outsourcing company, Lender Processing Services of Jacksonville, Fla., fell 5 percent on Tuesday, adding to a slide that began last week.
 
The company’s documentation practices are stirring questions, including how the same employee can have wildly varying signatures on mortgage documents. L.P.S. blamed a midlevel manager’s decision to allow employees to sign forms in the name of an authorized employee. It says it has stopped the practice.
 
The United States Attorney’s Office in Tampa began investigating L.P.S. in February. An L.P.S. representative could not be reached Tuesday for comment.
 
Other calls for investigations came from Senators Al Franken, a Democrat from Minnesota, and Robert Menendez, a Democrat from New Jersey.
 
 

 This article from http://www.nytimes.com/2010/10/06/business/06mortgage.html

 Racketeering Case Filed Against Ally And Citigroup

POSTED ON OCTOBER 5TH 2010
 
A popular bank and a mortgage servicer are being sued by homeowners in Kentucky for conspiring with a mortgage transfers company for falsely foreclosing on loans. It is a serious allegation and when proven true, then a lot of homeowners who are currently facing foreclosures just might get a chance to save their homes.
 
Homeowners in Kentucky have filed a lawsuit against Citigroup Inc. and Ally Financial Inc., alleging that the two have conspired with Reston, Virginia-based Mortgage Electronic Registration Systems Inc. in falsely foreclosing on loans.


Filed as a civil-racketeering class action on behalf of the Kentucky homeowners facing foreclosures, the lawsuit claims that banks – via MERS, which handles mortgage transfers among banks – are foreclosing on homes to which they don’t hold titles to properties. The complaint was filed in a federal court in Louisville, Kentucky on the 24th of September.
 
The complaint reads, “Defendants have filed foreclosures throughout the state of Kentucky and the United States of America knowing that they were not the ‘owners’ or beneficiaries of the loan they filed foreclosure upon.”
 
According to the lawsuit, the defendants either filed or caused to be filed mortgages through forged signatures. It also stated that foreclosure actions were filed months before any legal interests are acquired in the properties. Own notes executed with mortgages were also falsely claimed by the defendants, the lawsuit further says.
 
The case also claims that the defendants have violated the Racketeer Influenced and Corrupt Organizations Act. Though originally passed to pursue organized crime, RICO was brought to the case since the attorneys say the cases were well-thought out.
 
The Kentucky homeowners’ case is just one of the multiple cases against several banks and MERS for wrongful foreclosures. Several cases, which were combined in a multi-district litigation in Phoenix, have been dismissed last September 30. The judge allowed the plaintiffs to re-file their complaints, though.
 
In an emailed statement, Ally spokeswoman Gina Proia called the allegations “inflammatory” and without merit. Citigroup Inc. declined to comment, while MERS had no immediate comment.
 
This article originally posited at  http://bit.ly/9IzJOe
 

 How Will This Foreclosure Mess Affect You & Your Business?
(15 min Video)

 


Share Your Comments Below

Your Comments are very valuable and important

 Hey Mike,

 
Here’s a good one, there is a company called DocX, that, for a fee researches mortgages for banks, find  what the defects are in the paperwork, then, they create new docs to make it appear everything has been done correctly. 
They even have a price list for the various docs that would need to be "created" have a look at this http://bit.ly/bcNlQC
Take care,
Nicholas Capra
 
 
SUNDAY, OCTOBER 3, 2010
4ClosureFraud Posts Lender Processing Services Mortgage Document Fabrication Price Sheet
A bombshell has dropped in mortgage land.
 
We’ve said for some time that document fabrication is widespread in foreclosures. The reason is that the note, which is the borrower IOU, is the critical instrument to establishing the right to foreclose in 45 states (in those states, the mortgage, which is the lien on the property, is a mere “accessory” to the note).
 
The pooling and servicing agreement, which governs the creation of mortgage backed securities, called for the note to be endorsed (wet ink signatures) through the full chain of title. That means that the originator had to sign the note over to an intermediary party (there were usually at least two), who’d then have to endorse it over to the next intermediary party, and the final intermediary would have to endorse it over to the trustee on behalf of a specified trust (the entity that holds all the notes). This had to be done by closing; there were limited exceptions up to 90 days out; after that, no tickie, no laundry.
 
Evidence is mounting that for cost reasons, starting in the 2004-2005 time frame, originators like Countrywide simply quit conveying the note. We are told this practice was widespread, probably endemic. The notes are apparently are still in originator warehouses. That means the trust does not have them (the legalese is it is not the real party of interest), therefore it is not in a position to foreclose on behalf of the RMBS investors. So various ruses have been used to finesse this rather large problem.
 
The foreclosing party often obtains the note from the originator at the time of foreclosure, but that isn’t kosher under the rules governing the mortgage backed security. First, it’s too late to assign the mortgage to the trust. Second. IRS rules forbid a REMIC (real estate mortgage investment trust) from accepting a non-performing asset, meaning a dud loan. And it’s also problematic to assign a note from the originator if it’s bankrupt (the bankruptcy trustee must approve, and from what we can discern, the note are being conveyed without approval, plus there is no employee of the bankrupt entity authorized to endorse the note properly, another wee problem).
 
We finally have concrete proof of how widespread document fabrication was. For some reason the ScribD embeds aren’t working correctly, you can view the entire Lender Processing Services price sheet here, and here are the germane sections.
 
 Picture 21
 
 
Picture 22 
 
 
Not only are there prices up for creating, which means fabricating documents out of whole cloth, and look at the extent of the offerings. The collateral file is ALL the documents the trustee (or the custodian as an agent of the trustee) needs to have pursuant to its obligations under the pooling and servicing agreement on behalf of the mortgage backed security holder. This means most importantly the original of the note (the borrower IOU), copies of the mortgage (the lien on the property), the securitization agreement, and title insurance.
 
Also notice that there is a price for creating allonges. We discussed earlier that phony allonges have become the preferred fix for the failure to convey notes properly:
 
The cure for the mortgage documents puts the loan out of eligibility for the trust. In order to cure, on a current basis, they have to argue that the loan goes retroactively back into the trust. This is the cure that the banks have been unwilling to do, because it is a big problem for the MBS. So instead they forge and fabricate documents.
 
The letter in particular mentions an allonge. An allonge is a separate sheet of paper which is attached to a note to allow for more signatures, in this case, endorsements, to be added. Allonges have had a way of magically appearing in collateral files while trails are in progress (I’ve seen it happen in cases I was tracking; it’s gotten so common that some attorneys warn judges to be on the alert for “ta dah” moments).
 
The wee problem with an allonge miraculously being discovered is that the allonges that show up are inherently in violation of UCC (Uniform Commercial Code) provisions (UCC has been adopted by all states, a few states have minor quirks, but the broad provisions are very similar).
 
An allonge is NOT to be used unless all the space on the original note, including the margins and the back side of pages, has been used up. This is never the case. Second, an allonge has to be so firmly attached to the original document as to be inseparable. Thus an allonge suddenly being discovered is an impossibility (well impossible if it were legit), yet it seems to happen all the time.
 
This revelation touches every major servicer and RMBS trustee in the US. DocX is a part of of Lender Processing Services. Lender Processing Services has three lines of business, the biggest of which is “default services”, representing close to half its revenues of this over $2 billion in revenues company. DocX is its technology platform it uses to manage its national network of foreclosure mills. Note that DocX closed one of its offices in Alpharatta, Georgia earlier this year, per StopForeclosures:
 
On April 12, 2010, Lender Processing Services closed the offices of its subsidiary, Docx, LLC, in Alpharetta, Georgia. That office was responsible for pumping out over a million mortgage assignments in the last two years so that banks could foreclose on residential real estate. The law firms handling the foreclosures were retained and largely controlled by Lender Processing Services, according to a Sanctions Order entered by U.S. Bankruptcy Judge Diane Weiss Sigmund (In re Niles C. Taylor, EDPA, Case 07-15385-sr, Doc. 193). Lender Processing Services, the largest “default management services company” in the country, has already made at least partial admissions that there were faults in the documents produced by the Docx office – although courts and homeowners were never notified. According to Lender Processing Services, over 50 major banks use their default management services. The banks that especially need the services provided by Lender Processing Services include Deutsche Bank, Citibank, Wells Fargo and U.S. Bank, acting as trustees for mortgage-backed securitized trusts. These trusts, in the rush to securitize mortgages and sell them to investors, often ignored the critical step of obtaining mortgage assignments from the original lenders to the securities companies to the trusts. Now, years later, when the companies “servicing” the trusts need to foreclose, they retain Lender Processing Services to draft the missing documents. The mortgage servicers, including American Home Mortgage Services, Saxon Mortgage Services, and American Servicing Company, never disclose that the trusts are missing essential documents – they just rely on Lender Processing Services to “fix” the problems. Although the Alpharetta office has been closed, Lender Processing Services continues to mass produce “replacement” assignments from its Jacksonville, Florida, and Dakota County, Minnesota offices. Law firms retained by Lender Processing Services also often use their own employees, posing as officer of Mortgage Electronic Registration Systems, to produce the needed Assignments.
 
So wake up and smell the coffee. The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We’ve said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud. This price sheet provides concrete proof that the practices we pointed to not only existed, but are a routine way of doing business in servicer and trustee land. LPS is the major platform used by all the large servicers; it oversees the work of foreclosure mills in every state.
 
And this means document forgeries and fraud are not just a servicer problem or a borrower problem but a mortgage industry and ultimately a policy problem. These dishonest practices are so widespread that they raise serious questions about the residential mortgage backed securities market, the major trustees (such as JP Morgan, US Bank, Bank of New York) who repeatedly provided affirmations as required by the pooling and servicing agreement that all the tasks necessary for the trust to own the securitization assets had been completed, and the inattention of the various government bodies (in particular Fannie and Freddie) that are major clients of LPS.
 
Amar Bhide, in a 1994 Harvard Business Review article, said the US capital markets were the deepest and most liquid in major part because they were recognized around the world as being the fairest and best policed. As remarkable as it may seem now, his statement was seem as an obvious truth back then. In a mere decade, we managed to allow a “free markets” ideology on steroids to gut investor and borrower protection. The result is a train wreck in US residential mortgage securities, the biggest asset class in the world. The problems are too widespread for the authorities to pretend they don’t exist, and there is no obvious way to put this Humpty Dumpty back together.

 

Another article sent from Roger

 

Flawed Paperwork Aggravates a Foreclosure Crisis

By GRETCHEN MORGENSON
Published: October 3, 2010
 
As some of the nation’s largest lenders have conceded that their foreclosure procedures might have been improperly handled, lawsuits have revealed myriad missteps in crucial documents.
 
Jay LaPrete/Associated Press
Jennifer Brunner, the secretary of state of Ohio, has highlighted examples of what her office considers possible notary abuse.
The flawed practices that GMAC Mortgage, JPMorgan Chase and Bank of America have recently begun investigating are so prevalent, lawyers and legal experts say, that additional lenders and loan servicers are likely to halt foreclosure proceedings and may have to reconsider past evictions.
 
Problems emerging in courts across the nation are varied but all involve documents that must be submitted before foreclosures can proceed legally. Homeowners, lawyers and analysts have been citing such problems for the last few years, but it appears to have reached such intensity recently that banks are beginning to re-examine whether all of the foreclosure papers were prepared properly.
 
In some cases, documents have been signed by employees who say they have not verified crucial information like amounts owed by borrowers. Other problems involve questionable legal notarization of documents, in which, for example, the notarizations predate the actual preparation of documents — suggesting that signatures were never actually reviewed by a notary.
 
Other problems occurred when notarizations took place so far from where the documents were signed that it was highly unlikely that the notaries witnessed the signings, as the law requires.
 
On still other important documents, a single official’s name is signed in such radically different ways that some appear to be forgeries. Additional problems have emerged when multiple banks have all argued that they have the right to foreclose on the same property, a result of a murky trail of documentation and ownership.
 
There is no doubt that the enormous increase in foreclosures in recent years has strained the resources of lenders and their legal representatives, creating challenges that any institution might find overwhelming. According to the Mortgage Bankers Association, the percentage of loans that were delinquent by 90 days or more stood at 9.5 percent in the first quarter of 2010, up from 4 percent in the same period of 2008.
 
But analysts say that the wave of defaults still does not excuse lenders’ failures to meet their legal obligations before trying to remove defaulting borrowers from their homes.
 
“It reflects the hubris that as long as the money was going through the pipeline, these companies didn’t really have to make sure the documents were in order,” said Kathleen C. Engel, dean for intellectual life at Suffolk University Law School and an expert in mortgage law. “Suddenly they have a lot at stake, and playing fast and loose is going to be more costly than it was in the past.”
 
Attorneys general in at least six states, including Massachusetts, Iowa, Florida and Illinois, are investigating improper foreclosure practices. Last week, Jennifer Brunner, the secretary of state of Ohio, referred examples of what her office considers possible notary abuse by Chase Home Mortgage to federal prosecutors for investigation.
 
The implications are not yet clear for borrowers who have been evicted from their homes as a result of improper filings. But legal experts say that courts may impose sanctions on lenders or their representatives or may force banks to pay borrowers’ legal costs in these cases.
 
Judges may dismiss the foreclosures altogether, barring lenders from refiling and awarding the home to the borrower. That would create a loss for the lender or investor holding the note underlying the property. Almost certainly, lawyers say, lawsuits on behalf of borrowers will multiply.
 
In Florida, problems with foreclosure cases are especially acute. A recent sample of foreclosure cases in the 12th Judicial Circuit of Florida showed that 20 percent of those set for summary judgment involved deficient documents, according to chief judge Lee E. Haworth.
 
“We have sent repeated notices to law firms saying, ‘You are not following the rules, and if you don’t clean up your act, we are going to impose sanctions on you,’ ” Mr. Haworth said in an interview. “They say, ‘We’ll fix it, we’ll fix it, we’ll fix it.’ But they don’t.”
 
As a result, Mr. Haworth said, on Sept. 17, Harry Rapkin, a judge overseeing foreclosures in the district, dismissed 61 foreclosure cases. The plaintiffs can refile but they need to pay new filing fees, Mr. Haworth said.
 
The byzantine mortgage securitization process that helped inflate the housing bubble allowed home loans to change hands so many times before they were eventually pooled and sold to investors that it is now extremely difficult to track exactly which lenders have claims to a home.
 
Many lenders or loan servicers that begin the foreclosure process after a borrower defaults do not produce documentation proving that they have the legal right to foreclosure, known as standing.
 
As a substitute, the banks usually present affidavits attesting to ownership of the note signed by an employee of a legal services firm acting as an agent for the lender or loan servicer. Such affidavits allow foreclosures to proceed, but because they are often dubiously prepared, many questions have arisen about their validity.
 
Although lawyers for troubled borrowers have contended for years that banks in many cases have not properly documented their rights to foreclose, the issue erupted in mid-September when GMAC said it was halting foreclosure proceedings in 23 states because of problems with its legal practices. The move by GMAC followed testimony by an employee who signed affidavits for the lender; he said that he executed 400 of them each day without reading them or verifying that the information in them was correct.
 
JPMorgan Chase and Bank of America followed with similar announcements.
 
But these three large lenders are not the only companies employing people who have failed to verify crucial aspects of a foreclosure case, court documents show.
 
Last May, Herman John Kennerty, a loan administration manager in the default document group of Wells Fargo Mortgage, testified to lawyers representing a troubled borrower that he typically signed 50 to 150 foreclosure documents a day. In that case, in King County Superior Court in Seattle, he also stated that he did not independently verify the information to which he was attesting.
 
Wells Fargo did not respond to requests for comment.
 
In other cases, judges are finding that banks’ claims of standing in a foreclosure case can conflict with other evidence.
 
Last Thursday, Paul F. Isaacs, a judge in Bourbon County Circuit Court in Kentucky, reversed a ruling he had made in August giving Bank of New York Mellon the right to foreclose on a couple’s home. According to court filings, Mr. Isaacs had relied on the bank’s documentation that it said showed it held the note underlying the property in a trust. But after the borrowers supplied evidence indicating that the note may in fact reside in a different trust, the judge reversed himself. The court will revisit the matter soon.
 
Bank of New York said it was reviewing the ruling and could not comment.
 
Another problematic case involves a foreclosure action taken by Deutsche Bank against a borrower in the Bronx in New York. The bank says it has the right to foreclose because the mortgage was assigned to it on Oct. 15, 2009.
 
But according to court filings made by David B. Shaev, a lawyer at Shaev & Fleischman who represents the borrower, the assignment to Deutsche Bank is riddled with problems. First, the company that Deutsche said had assigned it the mortgage, the Sand Canyon Corporation, no longer had any rights to the underlying property when the transfer was supposed to have occurred.
 
Additional questions have arisen over the signature verifying an assignment of the mortgage. Court documents show that Tywanna Thomas, assistant vice president of American Home Mortgage Servicing, assigned the mortgage from Sand Canyon to Deutsche Bank in October 2009. On assignments of mortgages in other cases, Ms. Thomas’s signatures differ so wildly that it appears that three people signed the documents using Ms. Thomas’s name.
 
Given the differences in the signatures, Mr. Shaev filed court papers last July contending that the assignment is a sham, “prepared to create an appearance of a creditor as a real party in interest/standing, when in fact it is likely that the chain of title required in these matters was not performed, lost or both.”
 
Mr. Shaev also asked the judge overseeing the case, Shelley C. Chapman, to order Ms. Thomas to appear to answer questions the lawyer has raised.
 
John Gallagher, a spokesman for Deutsche Bank, which is trustee for the securitization that holds the note in this case, said companies servicing mortgage loans engaged the law firms that oversee foreclosure proceedings. “Loan servicers are obligated to adhere to all legal requirements,” he said, “and Deutsche Bank, as trustee, has consistently informed servicers that they are required to execute these actions in a proper and timely manner.”
 
Reached by phone on Saturday, Ms. Thomas declined to comment.
 
The United States Trustee, a unit of the Justice Department, is also weighing in on dubious court documents filed by lenders. Last January, it supported a request by Silvia Nuer, a borrower in foreclosure in the Bronx, for sanctions against JPMorgan Chase.
 
In testimony, a lawyer for Chase conceded that a law firm that had previously represented the bank, the Steven J. Baum firm of Buffalo, had filed inaccurate documents as it sought to take over the property from Ms. Nuer.
 
The Chase lawyer told a judge last January that his predecessors had combed through the chain of title on the property and could not find a proper assignment. The firm found “something didn’t happen that needed to be fixed,” he explained, and then, according to court documents, it prepared inaccurate documents to fill in the gaps.
 
The Baum firm did not return calls to comment.
 
A lawyer for the United States Trustee said that the Nuer case “does not represent an isolated example of misconduct by Chase in the Southern District of New York.”
 
Chase declined to comment.
 
“The servicers have it in their control to get the right documents and do this properly, but it is so much cheaper to run it through a foreclosure mill,” said Linda M. Tirelli, a lawyer in White Plains who represents Ms. Nuer in the case against Chase. “This is not about getting a free house for my client. It’s about a level playing field. If I submitted false documents like this to the court, I’d have my license handed to me.”
 
Link to Article
http://www.nytimes.com/2010/10/04/business/04mortgage.html

 Amid mountain of paperwork, shortcuts and forgeries mar foreclosure process

 
 
By Ariana Eunjung Cha and Brady Dennis
Washington Post Staff Writers 
Thursday, September 23, 2010; 2:36 AM
 
The nation’s overburdened foreclosure system is riddled with faked documents, forged signatures and lenders who take shortcuts reviewing borrower’s files, according to court documents and interviews with attorneys, housing advocates and company officials.
 
THIS STORY
Connecticut and California join probe of Ally, order foreclosures freeze
Political Economy: Ally knew of faulty GMAC documents
Ally’s mortgage documentation problems could extend beyond 23 states
View All Items in This Story
The problems, which are so widespread that some judges approving the foreclosures ignore them, are coming to light after Ally Financial, the country’s fourth-biggest mortgage lender, halted home evictions in 23 states this week.
 
During the housing boom, millions of homeowners got easy access to mortgages while providing virtually no proof of their income or background. Now, as millions of Americans are being pushed out of the homes they can no longer afford, the foreclosure process is producing far more paperwork than anyone can read and making it vulnerable to fraud.
 
Ally Financial is now double-checking to make sure all documents are in order after lawsuits uncovered that a single employee of the company’s GMAC mortgage unit, a 41-year-old named Jeffrey Stephan, signed off on 10,000 foreclosure papers a month without checking whether the information justified an eviction.
 
Many of the homeowners in fact might have been in default. Some might have been unfairly targeted. But the flawed process is creating an opening for borrowers to contest some of the more than 2 million foreclosures that have taken place since the real estate crisis began.
 
The company sought to play down the impact of Stephan’s actions, saying this week that what he did amounted to a "technical" error but that the documents themselves were "factually accurate." Ally said it had no further comment Wednesday.
 
 
Forgeries
 
Ally wasn’t the only major lender that had a foreclosure process dependent on a few corporate bureaucrats.
 
Beth Ann Cottrell said in a sworn deposition in May that she signed off on thousands of foreclosures a month for JPMorgan Chase even though she did not verify the accuracy of the information.
 
In one instance in Palm Beach, Fla., Cottrell signed off on two documents that stated conflicting amounts of mortgage, the court testimony states. Cottrell claimed that both were signed by the borrower at closing. But the homeowner recognized that her signature had been forged, her attorney Christopher Immel said. The attorney added that such forgeries are common among the cases he’s seen. JPMorgan Chase declined to comment.
 
In Georgia, an employee of a document processing company, Linda Green, for years claimed to be executives of Bank of America, Wells Fargo, U.S. Bank and dozens of other lenders while signing off on tens of thousands of foreclosure affidavits. In many cases, her signature appeared to be forged by different employees.
 
Green worked for a foreclosure document company owned by Lender Processing Services. The company is being investigated by a U.S. attorney in Florida for allegedly using improper documentation to speed foreclosures.
 
Lenders have already started to withdraw foreclosures that had Green’s name on them.
 
Green also submitted to courts documents that listed "Bogus Assignee" as the owner of a mortgage instead of the real name. In another case, she signed as the vice president of "Bad Bene," a made-up company.
 
 
Ally’s mortgage documentation problems could extend beyond 23 states
View All Items in This Story
 
Michelle Kersch, a senior vice president for Lender Processing Services, said in an e-mailed statement Wednesday that the names were just "placeholders."
 
"Unfortunately, on occasion, incomplete documents were inadvertently recorded before the missing information was obtained," she said. "LPS regrets these errors and the use of this particular placeholder phrasing."
 
The company declined to comment further, citing the pending criminal investigation.
 
A large chunk of the nation’s foreclosures are being initiated by three companies owned by the federal government: Ally, Fannie Mae and Freddie Mac. Fannie and Freddie have said they are looking at the matter but refuse to reveal the numbers of affected homeowners.
 
The Obama administration has repeatedly said it would try to help homeowners facing foreclosure. But its principal mortgage-relief effort is faltering. More than half of those who enrolled in the program are have now fallen out of it, the Treasury Department said Wednesday.
 
This week, Treasury Secretary Timothy F. Geithner and the Obama administration’s newly appointed consumer protection adviser, Elizabeth Warren, also vowed to simplify the process for getting a mortgage.
 
But when asked to respond to problems plaguing foreclosures at the companies controlled by the Treasury, a spokesman repeatedly declined to respond to questions, saying only that the agency does not involve itself in the companies’ day-to-day affairs.
 
 
 
Judges’ oversight
 
Some of the problems in foreclosure paperwork are being created because mortgage loans were repackaged and resold to investors so often that the physical documents become lost. It’s the job of a document processor to present and vouch for the authenticity and accuracy of these papers, but attorneys for homeowners have unearthed examples where critical records are forged.
 
In theory, a judge should review the files one more time. But after the crisis produced massive numbers of delinquent homeowners, judges in many cases became overwhelmed.
 
Some simply took at face value the documents handed over to them by the lenders – who in many cases were not checking the files, either, according to interviews with judges, attorneys and consumer groups.
 
In some Florida courts, for instance, many judges automatically approve a foreclosure unless a borrower can point to a specific problem. Homeowners are given five minutes for a presentation. Often, they do not bother to show up.
 
Arthur M. Schack, a Kings County Supreme Court judge in Brooklyn, said it’s clear those involved in the foreclosure process are taking the legal requirements too lightly. They forget, he said, that there’s a bigger picture to think about: People are losing their homes.
 
Schack has become infamous among some of the nation’s most powerful banks for rejecting foreclosure motions that come across his courtroom – about half of the hundreds of files that he has reviewed over nearly three years. He said Ally’s document-processing violations shouldn’t be dismissed lightly.
 
"There are procedures to be followed in order to get a foreclosure, and you either get it right or not. Either you’re pregnant or not. There’s no in-between," he said.
 
But Judge Isaac Garb, a retired trial judge in Bucks County, Pa., who has heard many foreclosure cases and still oversees mortgage mediations, had a different view.
 
He said that because foreclosure files contain standard language, document processors such as Stephan do not need to review every page. He added that the signers are verifying only that the information in the file is "true and correct to the best of his/her knowledge, information and belief."
 
Often, homeowners are using minor problems in the documents simply to stall the foreclosure process as long as possible, Garb said.
 
David Berenbaum, chief program officer for the nonprofit National Community Reinvestment Coalition, said companies eager to get bad loans off their books quickly have given rise to a foreclosure system that is as faulty as the excessive lending that created the problem in the first place.
 
"What’s happened here is that there are these foreclosure machines that don’t do due diligence and that are profiting at the expense of consumers," he said.
 
Dennis reported from Doylestown, Pa. Staff researchers Julie Tate and Magda Jean-Louis contributed to this report.
 Page 2 of 2 « 1  2