Your Mortgage Documents are Fake!

August 21st, 2013

FAKE NEWS for the Zionist agenda

foreclosure-help

If you know about foreclosure fraud, the
mass fabrication of mortgage documents in state courts by banks
attempting to foreclose on homeowners, you may have one nagging
question: Why did banks have to resort to this illegal scheme?
~ David Dayen

Was it
just cheaper to mock up the documents than to provide the real ones?

Did
banks figure they simply had enough power over regulators, politicians
and the courts to get away with it? (They were probably right about that
one.)

A newly unsealed lawsuit, which banks
settled in 2012 for $95 million, actually offers a different reason,
providing a key answer to one of the persistent riddles of the financial
crisis and its aftermath.

The lawsuit states that banks resorted to
fake documents because they could not legally establish true ownership
of the loans when trying to foreclose.

This reality, which banks did not
contest but instead settled out of court, means that tens of millions of
mortgages in America still lack a legitimate chain of ownership, with
implications far into the future.

If Congress, supported by the
Obama administration, goes back to the same housing finance system, with
the same corrupt private entities who broke the nation’s private
property system back in business packaging mortgages, then shame on all
of us.

The 2011 lawsuit was filed in U.S.
District Court in both North and South Carolina, by a white-collar fraud
specialist named Lynn Szymoniak, on behalf of the federal government,
17 states and three cities.

Twenty-eight banks, mortgage servicers and
document processing companies are named in the lawsuit, including
mega-banks like JPMorgan Chase, Wells Fargo, Citi and Bank of America.

Szymoniak, who fell into foreclosure
herself in 2009, researched her own mortgage documents and found massive
fraud.

(For example, one document claimed that Deutsche Bank, listed as
the owner of her mortgage, acquired ownership in October 2008, four
months after they first filed for foreclosure).

She eventually examined
tens of thousands of documents, enough to piece together the entire
scheme.

A mortgage has two parts: the promissory
note (the IOU from the borrower to the lender) and the mortgage, which
creates the lien on the home in case of default.

During the housing
bubble, banks bought loans from originators, and then (in a process
known as securitization) enacted a series of transactions that would
eventually pool thousands of mortgages into bonds, sold all over the
world to public pension funds, state and municipal governments and other
investors.

A trustee would pool the loans and sell the securities to
investors, and the investors would get an annual percentage yield on
their money.

In order for the securitization to work,
banks purchasing the mortgages had to physically convey the promissory
note and the mortgage into the trust.

The note had to be endorsed (the
way an individual would endorse a check), and handed over to a document
custodian for the trust, with a “mortgage assignment” confirming the
transfer of ownership. This had to be done before a 90-day cutoff
date, with no grace period beyond that.

Georgetown Law professor Adam Levitin
spelled this out in testimony before Congress in 2010: “If mortgages
were not properly transferred in the securitization process, then
mortgage-backed securities would in fact not be backed by any mortgages
whatsoever.”

The lawsuit alleges that these notes, as
well as the mortgage assignments, were “never delivered to the
mortgage-backed securities trusts,” and that the trustees lied to the
SEC and investors about this.

As a result, the trusts could not
establish ownership of the loan when they went to foreclose, forcing the
production of a stream of false documents, signed by “robo-signers,”
employees using a bevy of corporate titles for companies that never
employed them, to sign documents about which they had little or no
knowledge.

Many documents were forged (the suit
provides evidence of the signature of one robo-signer, Linda Green,
written eight different ways), some were signed by “officers” of
companies that went bankrupt years earlier.

Dozens of assignments
listed as the owner of the loan “Bogus Assignee for Intervening
Assignments,” clearly a template that was never changed.

One defendant
in the case, Lender Processing Services, created masses of false
documents on behalf of the banks, often using fake corporate officer
titles and forged signatures. This was all done to establish standing to
foreclose in courts, which the banks otherwise could not.

Szymoniak stated in her lawsuit that,
“Defendants used fraudulent mortgage assignments to conceal that over
1400 MBS trusts, each with mortgages valued at over $1 billion, are
missing critical documents,” meaning that at least $1.4 trillion in
mortgage-backed securities are, in fact, non-mortgage-backed securities.

Because of the strict laws governing of these kinds of securitizations,
there’s no way to make the assignments after the fact. Activists have a
name for this: “securitization FAIL.”

One smoking gun piece of evidence in the
lawsuit concerns a mortgage assignment dated Feb. 9, 2009, after the
foreclosure of the mortgage in question was completed.

According to the
suit, “A typewritten note on the right hand side of the document states:
‘This Assignment of Mortgage was inadvertently not recorded prior to
the Final Judgment of Foreclosure… but is now being recorded to clear
title.'”

This admission confirms that the
mortgage assignment was not made before the closing date of the trust,
invalidating ownership. The suit further argued that “the act of
fabricating the assignments is evidence that the MBS Trust did not own
the notes and/or the mortgage liens for some assets claimed to be in the
pool.”

The federal government, states and
cities joined the lawsuit under 25 counts of the federal False Claims
Act and state-based versions of the law. All of them bought
mortgage-backed securities from banks that never conveyed the mortgages
or notes to the trusts.

The plaintiffs argued that, considering that
trustees and servicers had to spend lots of money forging and
fabricating documents to establish ownership, they were materially
harmed by the subsequent impaired value of the securities.

Also, these
investors (which includes the Treasury Department and the Federal
Reserve) paid for the transfer of mortgages to the trusts, yet they were
never actually transferred.

Finally, the lawsuit argues that the
federal government was harmed by “payments made on mortgage guarantees
to Defendants lacking valid notes and assignments of mortgages who were
not entitled to demand or receive said payments.”

Despite Szymoniak seeking a trial by
jury, the government intervened in the case, and settled part of it at
the beginning of 2012, extracting $95 million from the five biggest
banks in the suit (Wells Fargo, Bank of America, JPMorgan Chase, Citi
and GMAC/Ally Bank).

Szymoniak herself was awarded $18 million. The
underlying evidence was never revealed until the case was unsealed last
Thursday.

Now that it’s unsealed, Szymoniak, as
the named plaintiff, can go forward and prove the case.

Along with her
legal team (which includes the law firm of Grant & Eisenhoffer,
which has recovered more money under the False Claims Act than any firm
in the country), Szymoniak can pursue discovery and go to trial against
the rest of the named defendants, including HSBC, the Bank of New York
Mellon, Deutsche Bank and US Bank.

The expenses of the case, previously
borne by the government, now are borne by Szymoniak and her team, but
the percentages of recovery funds are also higher.

“I’m really glad I
was part of collecting this money for the government, and I’m looking
forward to going through discovery and collecting the rest of it,”
Szymoniak told Salon.

It’s good that the case remains active,
because the $95 million settlement was a pittance compared to the
enormity of the crime. By the end of 2009, private mortgage-backed
securities trusts held one-third of all residential mortgages in the
U.S.

That means that tens of millions of home mortgages worth trillions
of dollars have no legitimate underlying owner that can establish the
right to foreclose.

This hasn’t stopped banks from foreclosing anyway
with false documents, and they are often successful, a testament to the
breakdown of law in the judicial system.

To this day, the resulting
chaos in disentangling ownership harms homeowners trying to sell these
properties, as well as those trying to purchase them. It renders
some properties impossible to sell.

To this day, banks foreclose on
borrowers using fraudulent mortgage assignments, a legacy of failing to
prosecute this conduct and instead letting banks pay a fine to settle
it.

This disappoints Szymoniak, who told Salon the owner of these loans
is now essentially “whoever lies the most convincingly and whoever gets
the benefit of doubt from the judge.”

Szymoniak used her share of the
settlement to start the Housing Justice Foundation, a non-profit that
attempts to raise awareness of the continuing corruption of the nation’s
courts and land title system.

Most of official Washington, including
President Obama, wants to wind down mortgage giants Fannie Mae and
Freddie Mac, and return to a system where private lenders create
securitization trusts, packaging pools of loans and selling them to
investors.

Government would provide a limited guarantee to investors
against catastrophic losses, but the private banks would make the
securities, to generate more capital for home loans and expand
homeownership.

That’s despite the evidence we now have
that, the last time banks tried this, they ignored the law, failed to
convey the mortgages and notes to the trusts, and ripped off investors
trying to cover their tracks, to say nothing of how they violated the
due process rights of homeowners and stole their homes with fake
documents.

The very same banks that created this
criminal enterprise and legal quagmire would be in control again.

Why
should we view this in any way as a sound public policy, instead of a
ticking time bomb that could once again throw the private property
system, a bulwark of capitalism and indeed civilization itself, into
utter disarray?

As Lynn Szymoniak puts it, “The President’s calling for
private equity to return. Why would we return to this?”

David Dayen – August 15, 2013 – posted at FedralObserver