Lawyer:
Finance industry hired hair stylists, Walmart workers to approve
foreclosures By The Associated
Press | Tuesday, October 12th, 2010 -- 10:34 pm
In an effort
to rush through thousands of home foreclosures since 2007,
financial institutions and their mortgage servicing departments
hired hair stylists, Walmart floor workers and people who
had worked on assembly lines and installed them in "foreclosure
expert" jobs with no formal training, a Florida lawyer
says.
In depositions released Tuesday, many of those workers testified
that they barely knew what a mortgage was. Some couldn't define
the word "affidavit." Others didn't know what a
complaint was, or even what was meant by personal property.
Most troubling, several said they knew they were lying when
they signed the foreclosure affidavits and that they agreed
with the defense lawyers' accusations about document fraud.
"The mortgage servicers hired people who would never
question authority," said Peter Ticktin, a Deerfield
Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure
cases. As part of his work, Ticktin gathered 150 depositions
from bank employees who say they signed foreclosure affidavits
without reviewing the documents or ever laying eyes on them
— earning them the name "robo-signers."
The deposed employees worked for the mortgage service divisions
of banks such as Bank of America and JP Morgan Chase, as well
as for mortgage servicers like Litton Loan Servicing, a division
of Goldman Sachs.
Ticktin said he would make the testimony available to state
and federal agencies that are investigating financial institutions
for allegations of possible mortgage fraud. This comes on
the eve of an expected announcement Wednesday from 40 state
attorneys general that they will launch a collective probe
into the mortgage industry.
"This was an industrywide scheme designed to defraud
homeowners," Ticktin said.
The depositions paint a surreal picture of foreclosure experts
who didn't understand even the most elementary aspects of
the mortgage or foreclosure process — even though they
were entrusted as the records custodians of homeowners' loans.
In one deposition taken in Houston, a foreclosure supervisor
with Litton Loan couldn't define basic terms like promissory
note, mortgagee, lien, receiver, jurisdiction, circuit court,
plaintiff's assignor or defendant. She testified that she
didn't know why a spouse might claim interest in a property,
what the required conditions were for a bank to foreclose
or who the holder of the mortgage note was. "I don't
know the ins and outs of the loan, I just sign documents,"
she said at one point.
Until now, only a handful of depositions from robo-signers
have come to light. But the sheer volume of the new depositions
will make it more difficult for financial institutions to
argue that robo-signing was an aberrant practice in a handful
of rogue back offices.
Judges are unlikely to look favorably on a bank that claims
paperwork flaws don't matter because the borrower was in default
on the loan, said Kendall Coffey, a former Miami U.S. attorney
and author of the book "Foreclosures."
"There has to be a cornerstone of integrity to the process,"
Coffey said.
Bank of America responded to Tiktin's depositions by re-affirming
that an internal review has shown that its foreclosures have
been accurate. "This review will ensure we have a full
understanding of any potential issues and quickly address
them," Bank of America spokesman Dan Frahm said. Frahm
added that, on average, the bank's foreclosure customers have
not made a payment in more than 18 months.
JP Morgan Chase spokesman Thomas Kelly said the bank has
requested that courts not enter into any judgments until the
bank had reviewed its procedures. But Kelly added that the
bank believes that all the underlying facts of the cases involved
in the document fraud allegations are true.
Litton Loan Servicing did not respond to a request for comment.
Even before the foreclosure scandal broke, the housing market
was in the midst of an ugly detoxification. Now the escalating
crisis is likely to prolong the housing depression for at
least another few years. The allegations are opening the entire
chain of foreclosure proceedings to legal challenge. Some
foreclosures could be overturned. Others could be deemed illegal.
For a housing recovery to occur, all the foreclosed properties
— which could account for 40 percent of all residential
sales by 2012 — need to be re-scrutinized by the banks
and resold on the market. Now, with so much inventory under
a legal threat, the process will become severely delayed.
"This just adds more uncertainty to the whole mortgage
process, so buyers are asking themselves: do I want to buy
a home in this environment?" says Cris deRitis, director
of credit analytics at Moody's Analytics. "We need to
fix these issues before the economy can recover."
Though some have chalked up the foreclosure debacle to an
overblown case of paperwork bungling, the underlying legal
issues are far more serious. Yes, swearing that you've reviewed
documents you've never seen is a legal offense. But at the
center of the foreclosure scandal looms something much larger:
the question of who actually owns the loans and who has the
right to foreclose upon them. The paperwork issues being raised
by lawyers and attorneys generals have the potential to blight
not just the titles of foreclosed properties but also those
belonging to homeowners who have never missed a mortgage payment.
So far, JP Morgan Chase, PNC Financial and Litton Loan Servicing
have stopped some foreclosure proceedings in 23 states. Bank
of America and GMAC, recently renamed Ally, have extended
their moratoriums to all 50 states. Wells Fargo and Citigroup
have said they are continuing with foreclosures, adding that
they are confident in their documents and processes.
But Citigroup has now backpedaled some on that assertion.
The bank sent out a press release Tuesday that it was no longer
using the law firm of "foreclosure king" David Stern,
now under investigation by the Florida attorney general's
office. "Pending the outcome of the AG's investigation,
Citi is not referring new matters to this firm," the
bank said in an e-mailed statement.
Late last week, in an interview with the Florida attorney
general, a former senior paralegal in Stern's firm described
a boiler-room atmosphere in which employees were pressured
to forge signatures, backdate documents, swap Social Security
numbers, inflate billings and pass around notary stamps as
if they were salt.
Stern's lawyer, Jeffrey Tew, did not respond to a request
for comment.
Meanwhile, the public outrage continues to mount. In what
is perhaps a sign of things to come, a Simi Valley, Calif.,
couple and their nine children broke into their foreclosed
home over the weekend and moved back in, according to television
station KABC of Simi Valley. The couple, Jim and Danielle
Earl, say they were working with the bank to catch up on payments
until they discovered a $25,000 difference between what they
owed and what the bank said they owed. The family was evicted
from their Spanish-style two-story in July. The home has been
sold, and the new owner was due to move in soon.
The Earls and their attorney now allege that they were victims
of fraudulent paperwork.