Posts Tagged ‘robo-signer’

Are You a Robo-Signer?

You may not think you’re a robo-signer, and, hopefully, you’re not.  But in today’s climate of foreclosure chaos, you may be a robo-signer and not even know it!  That’s what West Palm Beach resident Liz Mills realized when she googled her name on-line, as the Palm Beach Post describes here.

Is this what it’s come to nowadays?  The fraud is so rampant that people have their signatures forged and don’t even know it? 

Here’s the article, another in a series of fine reporting by Kimberly Miller. 

West Palm Beach resident Liz Mills learned she was a robo-signer when a friend suggested she search her own name online.  On foreclosure blogs and in at least one newspaper article, the 51-year-old process server was singled out for the numerous and varying styles of her signatures on summons paperwork used to prove her efforts in locating home­owners in foreclosure.

Now Mills is coming forward in affidavits filed in three foreclosure cases, saying she didn’t sign the paperwork and never signed in front of a notary despite notary stamps affixed to the documents.

In one case, Mills allegedly signed a return of non-service, meaning the homeowner could not be found, for a foreclosure in Lehigh Acres near Florida’s west coast – a town where Mills said she has never been.

“I’m not really sure what’s going on with all of this or what could happen, but it’s upsetting because if you read the articles it’s like they are trying to make the individual process servers the fall guy,” said Mills, who became a process server 12 years ago. “I think they just wanted to move the paperwork along faster.”

Service of process is sometimes the first notice a homeowner has that the bank has filed for foreclosure .  Sloppy service or “sewer service,” as some defense attorneys call bad service of process, can leave a homeowner in the dark and defenseless until after the final judgment and a notice of sale is sent out.

Defense attorney Tom Ice, of Royal Palm Beach-based Ice Legal, believes Mills’ testimony in the three cases could force them to be re-served, sending the banks back to square one in the proceedings.  “It’s always bothered me that a high number of my clients come in and say they didn’t know there was a lawsuit,” said Ice, who is defending the homeowners in the cases.

With the crush of foreclosures statewide, process service has become big business. Once entrusted only to sheriff’s deputies, summonses may now be handled by special process servers certified by the court. The servers often work for larger companies that dole out the legwork.

Mills worked for several process service companies, including Miami­-based Gissen & Zawyer Process Service Inc.

The Florida Attorney General’s Office is investigating the company after allegations of backdating returns of service, improper billing practices and filing questionable affidavits with the courts.

Mills said she believes her signatures were forged on documents because she has a short name that’s easy to sign.

But Alan Rosenthal, an attorney defending Gissen & Zawyer, said the company believes the documents in question in the Mills cases bear her true signature.

“Gissen & Zawyer does not have any of its personnel sign affidavits of service other than the process server whose name is on the signature line, and does not condone such behavior by anyone who works for them,” Rosenthal said. “Gissen & Zawyer believes the signatures on the Liz Mills affidavits are hers.”

Process service company Caplan, Caplan and Caplan, which Mills also worked for and is involved in one of the cases, had no comment.

While Mills’ affidavits attesting to forged documents directly affect three foreclosures, there could be an impact on other cases that bear her name.

Judges have recently dismissed foreclosures based on bad service of process, although the cases can usually be refiled.

A 4th District Court of Appeal decision in December sided with the homeowner, based on paperwork that contained an illegible grouping of numbers – either the server’s identification number or the time of service. Both are required by state statute.

Mills, a former waitress, said she became a process server because she was a single mom and it offered a flexible schedule.

The typical charge for process service is $45, about $10 of which goes to pay Mills, who may have to make several visits to a home.

When Gissen & Zawyer didn’t think she was working fast enough, she said, she was called to Miami for a conference.

“They stood there and screamed at me that I was not serving their work fast enough,” said Mills, who worked for the company about 10 months.

Ice said the reprimand shows speed was valued over thoroughness.  “These were processed like an assembly line,” said Ice, whose firm handled the 4th DCA case. “The pressure was not just on Mills. It’s on all of the process servers to do whatever it takes to get the job done quickly.”

Mark Stopa

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Nationwide Title – the Hypocrisy is overwhelming

Nationwide Title Clearing is making headlines.  First, it obtained an injunction against fellow foreclosure defense attorney Christopher Forest, requiring him to remove video depositions of three of its employees from youtube.  Why, exactly?  Well, from what I can tell, NTC doesn’t want the public to be able to see video depositions of its employees, who apparently testified that they executed hundreds of foreclosure-related documents without reading them and without knowing their contents.  How does that give rise to a right to injunctive relief?  Honestly, it beats the heck out of me.  My best guess, from what I’ve read in the media, is that the employees who testified in these depositions had their personal lives disrupted because of the high level of public outrage at the content of the depositions.   

Meanwhile, NTC has sued my friend and foreclosure defense lawyer Matt Weidner for libel, asserting he damaged its business reputation by blogging that NTC employees are “robo-signers” that “manufacture evidence” to facilitate foreclosures. 

Am I crazy, or does anyone else see the hypocrisy here?  Think about it. 

On the one hand, NTC wants to sue Matt Weidner for damaging its business reputation by using terms like “robo-signer.”  In doing so, NTC wants to take the position that everything is on the “up and up” with how it does business (and it was “defamed” by Matt’s suggestions otherwise). 

Meanwhile, NTC is fighting vigorously to shield depositions of its employees from the public, pushing for an injunction requiring Christopher Forrest to remove the video depositions from youtube. 

As I see it, if everything is on the “up and up” at NTC, as it wants to allege in the suit against Matt, why is it going to such efforts to shield its the public from learning about its operations?  In other words, if NTC is being “defamed” by use of the term “robo-signer,” then why is it unwilling to let the public see testimony from its employees about the manner in which they execute documents? 

Let’s put it this way.  I don’t know what’s going on behind closed doors at Nationwide Title.  It seems to me, though, that if everything were up on the “up and up,” as it wants to contend in the suit with Matt, then it wouldn’t be so hesitant to let everyone see and hear what’s going on at NTC from the mouths of its own employees.  Show us the depositions.  Explain it to us.  If you’re an upstanding, reputable company, open your doors and prove it. 

Maybe I’m naive.  If it were me, though, and somebody was falsely accusing me and/or my company of “manufacturing evidence” or doing something illegal, I’d do whatever I could to prove my innocence.  I’d be talkiing to the media, opening my books and records, explaining my company’s operations – doing whatever I could to reveal the truth.  I certainly wouldn’t be going to court to try to shield evidence of my conduct. 

If you’re reading this, NTC, consider this a challenge.  If your employees aren’t “robo-signers,” then terminate the injunction.  Heck, give me consent to post the video depositions on this website.  Let the public hear your employees testify – let the public be the judge.  If everything is on the “up and up,” I’m sure you’ll have nothing to worry about.  If you’re not willing to do that, as the injunction suggests, you can’t blame anyone for questioning exactly what’s going on behind closed doors at NTC.

Mark Stopa

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Citimortgage admits foreclosure paperwork problems

Today’s Washington Post reports that Citimortgage has admitted mistakes in its foreclosure filings.  Unfortunately, news like this has become so common that it’s easy to say “ho, hum,” but we must not fall into that trap.  For instance, here’s a quote that is buried in the story but, upon reflection, is really, really disturbing:

“to assure that these affidavits are substantively correct and properly executed, Citi expects that affidavits executed prior to the fall of 2009 will need to be refiled”

Think about that for a minute.  As I read that, Citi is admitting that all affidavits executed in and before the Summer of 2009 must be re-filed, apparently because every such affidavit was done incorrectly.  You may think that’s a good thing, but ask yourself this – what about all of the homes Citi foreclosed on from before the Fall of 2009? 

I can’t speak for Citi, but I can vitually guarantee you that Citi isn’t going to unwind any of those foreclosures.  The new affidavits wil only be filed in the cases that aren’t already over.  For those that lost their homes to improper evidence, there is, apparently, no remedy. 

Here’s the entire story…

Citigroup, which for almost two months has claimed its process for preparing foreclosure affidavits was sound, is reviewing about 14,000 documents, including 4,000 that may have been notarized improperly, a company official said in written testimony to Congress to be delivered Thursday.

Unlike other large mortgage servicers it competes with, Citi had not frozen foreclosures and had repeatedly declined to publicly discuss any internal reviews it was conducting.  Harold Lewis, managing director of CitiMortgage, said in the written remarks that 10,000 of the 14,000 documents being reviewed are for judicial foreclosures.

The purpose of the review is “to assure that these affidavits are substantively correct and properly executed. Citi expects that affidavits executed prior to the fall of 2009 will need to be refiled,” Lewis said.  The other 4,000 documents that are being reviewed were prepared at its Dallas processing center and “may not have been signed in the presence of a notary, to assure that these affidavits are substantively correct and properly executed.” Lewis said these affidavits were also be refiled.

Lewis and other representatives from large mortgage servicers-Bank of America, J.P. Morgan Chase, Ally Financial-will take questions from members of Congress Thursday starting at 10 a.m. at a House Financial Services Committee hearing.  Lewis said that Citibank had been taking steps to improve its foreclosure practices since the fall of 2009.

In responding to questions about the robo-signing problems at other servicers, Citi has previously said that it has “have strong training to ensure that appropriate employees are fully aware of the proper procedures.”

Mark Stopa

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PNC reviewing its foreclosure procedures – so what?

At this point, we’ve all seen stories in the media about various banks halting or suspending its foreclosure procedures in the wake of news reports about foreclosure fraud, fraudulent affidavits, and robo-signers.  In my practice, these stories are just that – stories – and there is little if anything different on the “ground level” for foreclosure defense attorneys such as myself.  In other words, cases proceed forward, as normal, despite the purported “moratoriums” by banks such as BofA and GMAC.

Today, though, I received this Motion_for_Temporary_Stay in a case where PNC Bank is the Plaintiff.  It’s quite unique, as I can’t recall seeing a motion like it.  In the motion, PNC asks that the Court stay (i.e. halt or suspend) the foreclosure lawsuit through the end of November, 2010 “to allow time for the completion of a review of its mortgage servicing procedures,” a review that PNC notes was “commenced following nationwide reports of certain industry-wide deficiencies in the preparation of affidavits submitted in foreclosure proceedings.”  PNC goes on to say that it “intends to take all necessary steps to ensure that the documentation provided in connection with foreclosure proceedings, including this one, meets all applicable legal requirements.” 

So … what do I make of this motion?  Honestly, not much.   This motion has essentially no impact on this case (or any other).  Candidly, it seems silly to me that PNC would take the time to file a motion asking for a two-week stay.  Did PNC really think my client was going to try to aggressively litigate this case in the next two weeks?  Let’s put it this way – lots of lawsuits (in and out of the foreclosure arena) lie dormant for two weeks or more as a matter of routine.  Even aggressive plaintiffs’ attorneys often have two-week periods with little activity in a particular file.  Hence, in my view, PNC could have gone about this “review” process without filing anything at all (and nobody, including me, would have known any different or been affected in the slightest way).  The question thus becomes – why is PNC filing these motions?  Why is PNC paying its lawyers to file motions alerting attorneys like me (not to mention the public) that it is reviewing its foreclosure procedures?  Is it just me, or does something smell here?

You may think I’m being overly harsh.  After all, I suppose it’s a good thing that PNC is reviewing its procedures and is (apparently) trying to prosecute foreclosure cases the right way.  That said, this feels to me like a public relations stunt.  I mean … how much of a review can PNC really do in two weeks?  And even if it finds something wrong, is it really going to admit as much (particularly on files where the foreclosures have already been concluded)? 

It’s nice that PNC says it’s reviewing its foreclosure proceedings.  But let me know when a bank takes the time to do a comprehensive review, makes widespread changes to the process, and/or actually admits it did something wrong – that’s when I’ll take notice.  Unfortunately, a motion like this seems like nothing more than a public relations stunt.

Mark Stopa

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Reflections on the Foreclosure Conference with Judges

I was one of a handful of attorneys who had the opportunity to participate in a conference with Chief Judge Thomas McGrady and several other judges in Florida’s Sixth Judicial Circuit (Pasco and Pinellas Counties) to discuss foreclosure-related issues.  The conference was a unique opportunity for everyone to share their concerns about the foreclosure process in an open forum.  Having reflected on the conference, here are my thoughts – both the good and the bad.  

First off, I applaud Judge McGrady and the other judges who were willing to attend the conference and discuss these issues, with bank attorneys and foreclosure defense attorneys, in an open forum.  I’m often critical of procedures being utilized in Florida courtrooms in foreclosure cases, so let’s give credit where credit is due.  These judges deserve kudos for their willingness to discuss these issues openly, with both sides, as part of their attempts to promote fairness and efficiency in the process.  I still disagree with some of the procedures, but the effort is there, at least in the Sixth Judicial Circuit.  Anyway, here’s what I took out of the conference:

1.  Judges Rule Based on Evidence in Each Case.  Many homeowners have wondered (as did the media, who was invited into the latter part of the conference) what judges are doing differently in the wake of numerous media stories about fraudulent affidavits, foreclosure fraud, robo-signers, and the like.  All of the judges made one thing clear – they rule based on the evidence before them in each particular case.  Media reports, news stories, and internet articles are not part of a court file and judges do not take them into account when ruling on a particular case.  In fact, the judges deem it part of their responsibility to ignore such factors when adjudicating a case.  Quite simply, judges’ rulings are based on the evidence before them in that particular file and not anything external. 

2.  If you’re a homeowner, and want to defend a foreclosure, you must present evidence!  Many people believe judges should be ruling in favor of homeowners in foreclosure cases in light of the many recent stories about foreclosure fraud.  The judges have made it clear, though, that they aren’t going to make rulings based on newspaper articles or internet stories.  To me, that means one thing:

If you want to fight your foreclosure, you must present evidence!

The judge on your case isn’t going to rule in your favor based on anything being said in the media.  If you think there’s fraud or other misconduct being committed by the bank in your foreclosure case, you have to prove it to the judge.  In my view, the best way to do that is to retain a competent foreclosure defense attorney to represent you, as asserting such defenses is what we do.  You may suspect there’s fraud, and the media may be reporting fraud, but you have to prove fraud in your case or it won’t matter. 

3.  Judges’ opinions on the law vary widely.  It was fascinating to see a panel of judges, all of whom are obviously intelligent jurists, have such different opinions on legal issues in foreclosure cases.  At various points in the conference, different judges were openly (but respectfully) disagreeing with one another.  To me, this is a huge indication that our appellate courts need to issue more written opinions in foreclosure cases (so as to clarify the law on these issues), but in the meantime, it shows that arguments that work in one courtroom may not work in another, and vice versa. 

For instance, on the issue of affidavits supporting summary judgment (a hot topic in the media in recent weeks), the judges seem to fall into one of three categories: (1) some judges believe documents must be attached to an affidavit to satisfy the mandates of Rule 1.510(e) (a topic I discussed at length in my blog titled “Willful Blindness by Judges”), even in cases where the homeowner is not defending the foreclosure suit, failing which summary judgment will be denied; (2) some judges believe the absence of such documents is not a reason to deny summary judgment when the homeowner is not defending the case, but if the homeowner opposes summary judgment and objects based on the absence of supporting documents, then summary judgment will be denied; and (3) some judges believe the absence of such documents is not an impediment to summary judgment, even in the face of an objection (or, unfortunately, don’t care).  I agree with the judges in the first category, and it’s hard for me to see an argument otherwise.  The fact that there are differences of opinion, though, and that reasonable judges can disagree, reflects the need for homeowners to retain a competent attorney to raise these arguments in foreclosure cases.  Where there are no black and white answers, persuasive argument from counsel can carry the day. 

One concern I raised was how Pinellas County grants summary judgments of foreclosure even when the plaintiff or its counsel does not attend the hearing (if the defendant does not attend, either).  When I voiced my disagreement with this approach to Chief Judge McGrady, who defended the procedure and clearly did not want to argue with me about it, the Pasco County judges indicated, essentially, that they agree with me.  In their courts, if a plaintiff’s counsel does not attend a summary judgment hearing, they presume the plaintiff doesn’t care (or the case settled) and the motion is denied. 

4.  Ex Parte Orders.  During the conference, I voiced my concern about how judges enter Orders from Plaintiff’s attorneys ex parte, i.e. without notice to defense counsel and without a hearing.  The general consensus from the judges is that this shouldn’t happen but, given the volume of paperwork they’re dealing with, it’s going to happen from time to time, so it’s up to defense attorneys to challenge such Orders after they’re entered.  Candidly, I’m disappointed there isn’t a procedure in place to prevent such Orders, but at least the judges realize the problem. 

I monopolized a fair amount of the discussion during the conference, but I’m aggravated with myself that I didn’t initiate one more discussion – about judges taking it upon themselves to prosecute a foreclosure case by sua sponte setting a hearing.  I’ll make that issue number 1 at the next such conference.  In the meantime, bear in mind: 

If you want to defend your foreclosure, you must present evidence! 

Judges will not consider media stories if there is no evidence of it in your case.

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A Synopsis of Foreclosure-Gate; Blame the Banks!

I’m glad to see an increasing number of reporters placing the blame for the foreclosure crisis where it belongs – in the laps of the big banks.  Here’s an article from the New York Times that sums up public perception:   

How the Banks Put the Economy Underwater

Published: October 30, 2010

IN Congressional hearings last week, Obama administration officials acknowledged that uncertainty over foreclosures could delay the recovery of the housing market. The implications for the economy are serious. For instance, the International Monetary Fund found that the persistently high unemployment in the United States is largely the result of foreclosures and underwater mortgages, rather than widely cited causes like mismatches between job requirements and worker skills.

This chapter of the financial crisis is a self-inflicted wound. The major banks and their agents have for years taken shortcuts with their mortgage securitization documents — and not due to a momentary lack of attention, but as part of a systematic approach to save money and increase profits. The result can be seen in the stream of reports of colossal foreclosure mistakes: multiple banks foreclosing on the same borrower; banks trying to seize the homes of people who never had a mortgage or who had already entered into a refinancing program.

Banks are claiming that these are just accidents. But suppose that while absent-mindedly paying a bill, you wrote a check from a bank account that you had already closed. No one would have much sympathy with excuses that you were in a hurry and didn’t mean to do it, and it really was just a technicality.

The most visible symptoms of cutting corners have come up in the foreclosure process, but the roots lie much deeper. As has been widely documented in recent weeks, to speed up foreclosures, some banks hired low-level workers, including hair stylists and teenagers, to sign or simply stamp documents like affidavits — a job known as being a “robo-signer.”

Such documents were improper, since the person signing an affidavit is attesting that he has personal knowledge of the matters at issue, which was clearly impossible for people simply stamping hundreds of documents a day. As a result, several major financial firms froze foreclosures in many states, and attorneys general in all 50 states started an investigation.

However, the problems in the mortgage securitization market run much wider and deeper than robo-signing, and started much earlier than the foreclosure process.

When mortgage securitization took off in the 1980s, the contracts to govern these transactions were written carefully to satisfy not just well-settled, state-based real estate law, but other state and federal considerations. These included each state’s Uniform Commercial Code, which governed “secured” transactions that involve property with loans against them, and state trust law, since the packaged loans are put into a trust to protect investors. On the federal side, these deals needed to satisfy securities agencies and the Internal Revenue Service.

This process worked well enough until roughly 2004, when the volume of transactions exploded. Fee-hungry bankers broke the origination end of the machine. One problem is well known: many lenders ceased to be concerned about the quality of the loans they were creating, since if they turned bad, someone else (the investors in the securities) would suffer.

A second, potentially more significant, failure lay in how the rush to speed up the securitization process trampled traditional property rights protections for mortgages.

The procedures stipulated for these securitizations are labor-intensive. Each loan has to be signed over several times, first by the originator, then by typically at least two other parties, before it gets to the trust, “endorsed” the same way you might endorse a check to another party. In general, this process has to be completed within 90 days after a trust is closed.

Evidence is mounting that these requirements were widely ignored. Judges are noticing: more are finding that banks cannot prove that they have the standing to foreclose on the properties that were bundled into securities. If this were a mere procedural problem, the banks could foreclose once they marshaled their evidence. But banks who are challenged in many cases do not resume these foreclosures, indicating that their lapses go well beyond minor paperwork.

Increasingly, homeowners being foreclosed on are correctly demanding that servicers prove that the trust that is trying to foreclose actually has the right to do so. Problems with the mishandling of the loans have been compounded by the Mortgage Electronic Registration System, an electronic lien-registry service that was set up by the banks. While a standardized, centralized database was a good idea in theory, MERS has been widely accused of sloppy practices and is increasingly facing legal challenges.

As a result, investors are becoming concerned that the value of their securities will suffer if it becomes difficult and costly to foreclose; this uncertainty in turn puts a cloud over the value of mortgage-backed securities, which are the biggest asset class in the world.

Other serious abuses are coming to light. Consider a company called Lender Processing Services, which acts as a middleman for mortgage servicers and says it oversees more than half the foreclosures in the United States. To assist foreclosure law firms in its network, a subsidiary of the company offered a menu of services it provided for a fee.

The list showed prices for “creating” — that is, conjuring from thin air — various documents that the trust owning the loan should already have on hand. The firm even offered to create a “collateral file,” which contained all the documents needed to establish ownership of a particular real estate loan. Equipped with a collateral file, you could likely persuade a court that you were entitled to foreclose on a house even if you had never owned the loan.

That there was even a market for such fabricated documents among the law firms involved in foreclosures shows just how hard it is going to be to fix the problems caused by the lapses of the mortgage boom. No one would resort to such dubious behavior if there were an easier remedy.

The banks and other players in the securitization industry now seem to be looking to Congress to snap its fingers to make the whole problem go away, preferably with a law that relieves them of liability for their bad behavior. But any such legislative fiat would bulldoze regions of state laws on real estate and trusts, not to mention the Uniform Commercial Code. A challenge on constitutional grounds would be inevitable.

Asking for Congress’s help would also require the banks to tacitly admit that they routinely broke their own contracts and made misrepresentations to investors in their Securities and Exchange Commission filings. Would Congress dare shield them from well-deserved litigation when the banks themselves use every minor customer deviation from incomprehensible contracts as an excuse to charge a fee?

There are alternatives. One measure that both homeowners and investors in mortgage-backed securities would probably support is a process for major principal modifications for viable borrowers; that is, to forgive a portion of their debt and lower their monthly payments. This could come about through either coordinated state action or a state-federal effort.

The large banks, no doubt, would resist; they would be forced to write down the mortgage exposures they carry on their books, which some banking experts contend would force them back into the Troubled Asset Relief Program. However, allowing significant principal modifications would stem the flood of foreclosures and reduce uncertainty about the housing market and mortgage securities, giving the authorities time to devise approaches to the messy problems of clouded titles and faulty loan conveyance.

The people who so carefully designed the mortgage securitization process unwittingly devised a costly trap for people who ran roughshod over their handiwork. The trap has closed — and unless the mortgage finance industry agrees to a sensible way out of it, the entire economy will be the victim.

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Homeowners vs. Bankers – Tug of War, in quicksand

The foreclosure crisis has spawned a myriad of headline-grabbing, national stories.  Foreclosure fraud.  Robo-signers.  Strategic default.  Many brilliant Americans are trying to figure out how to solve the problem.  Finding the solution begins with understanding the problem. 

As a foreclosure defense attorney on the “front lines” of the crisis every day, I believe the problem is much simpler than people realize. Homeowners and bankers are in a Tug-of-War.  On one side of the rope, homeowners are pulling, trying to get loan modifications.  On the other side, bankers are pulling, trying to finalize foreclosures.   

                      Homeowners                    vs.                              Bankers

 (I have homeowners on the left because they’re clearly the underdogs, struggling with inferior resources.  The bankers are on the right due to their vast resources, aided by the bailout from the government.)

Everything we’ve seen in the foreclosure crisis falls under the umbrella of this Tug-of-War.  In my view, it started with the bail-out of the banks, so let’s start there. 

1.  In 2008, with our nation’s economy in the toilet, the government bailed out the banks, intending to spur lending and stimulate the economy.  But the bankers don’t modify loans. 

Government Bails Out Bankers ==> No Loan Modifications.

2.  The lack of loan modifications spawned more defaults by homeowners and unprecedented increases in the volume of foreclosures.

No Modifications ==> More Defaults & More Foreclosures 

3.  Faced with higher volume, bankers instituted questionable procedures to cut corners.  Robo-signers.  Foreclosure fraud (or, at minimum, neglect). 

No Modifications ==> More Foreclosures ==> Bankers Cut Corners

4.  Without modifications, and facing foreclosure, homeowners fight back, hiring foreclosure defense attorneys (particularly in states like Florida, which require judicial oversight). 

No Modifications ==> Homeowners fight back, Hire Lawyers

5  Foreclosure defense attorneys help homeowners, uncover fraud.

No Modifications ==> Homeowners Hire Lawyers ==> Bankers’ Fraud Exposed 

6.  As this whole process continues, the real estate market and economy as a whole continue to stagnate.  The ongoing Tug-of-War is being played in quicksand – both sides are pulling, and everyone is sinking. 

More and more Americans wonder why they should pay they should pay their mortgage when a house down the street is selling for 40% of the mortgage.  It’s the advent of strategic default.

No Modifications ==> Strategic Default

7.  Not wanting everyone to default, bankers still refuse modifications.  (This is one of the big perversities of the system.  Bankers will never admit it, but the single biggest reason they won’t modify loans is they don’t want to incentivize all of the homeowners who are current on their loans to go into default.) 

No Modifications ==> Strategic Default ==> No Modifications

8.  Meanwhile, in states with judicial oversight of foreclosures, like Florida, judges see their caseloads quadruple, essentially overnight, prompting unprecedented procedural changes, and, in many circles, skepticism in the judiciary (due to the increasing perception that courts have enabled the foreclosure fraud). 

No Modifications ==> Higher Volume ==> Strain on Judiciary

Now we sit, in October, 2010, with terms like robo-signer, moratorium, and foreclosure-gate a part of daily conversation.  The Tug-of-War is now more intense than ever.  Public debate rages about which side is right – the bankers or the homeowners, each side growing larger in number and getting more entrenched in their respective positions.  Meanwhile, high-ranking officials try to solve the problem, struggling to come up with a solution. 

Respectfully, the solution is simple.  AMERICANS NEED LOAN MODIFICATIONS.  Let me shout it from the rooftops:


I’ve blogged on this website repeatedly about the problems with the loan modification process.  If the government has any intention of fixing the mess, and the economy as a whole, it must find a way to force banks to modify loans.  A few suggestions:

1.  Every time a bank forecloses, impose a tax.  A stiff one.  Make the tax pro rata based on the value of the property.  “You want to foreclose, bank.  Fine.  Pay $25,000.  Or $50,000.”  If bankers won’t modify loans, incentivize them to do so by hitting ‘em where it hurts – the wallet. 

2.  Reduce the principal on every owner-occupied property to its present value.  I made this suggestion on this blog weeks ago, before Foreclosure-Gate became a national phenomenon.  Yes, it’s a drastic suggestion, but this would drastically reduce strategic defaults, eliminate the backlog in our courts, and make mortgages affordable again.  The bankers got bailed out (and didn’t help homeowners at all) – it’s time to bail out the people.  Bankers may argue this is unfair, but I’d counter that this would stabilize housing prices, spur home sales, and get homeowners to start borrowing again. 

3.  Require judicial oversight of foreclosures in every state.  If it’s harder for banks to foreclose, it will give them incentive to work out loan modifications. 

4.  Require banks to attempt modifications as a condition precedent to foreclosure.  More importantly, make the banks prove that they complied with these conditions, to a judge, even in uncontested cases, before they can begin a foreclosure suit. 

Until some such actions are taken, the Tug-of-War will continue.  So if you’re a homeowner facing foreclosure, unable to get a loan modification, you really have little choice but to retain a competent foreclosure defense attorney, fight your foreclosure, and see what happens in the court system.  At worst, you’ll be able to stay in your home a bit longer, and, hopefully, get back on your feet. 

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More affidavits from Stern employees

David Stern’s lawyer tried to explain away the eye-opening testimony of Tammie Lou Kapusta as that of a former, disgruntled employee.  I wonder what he’d say now that two more individuals have testified similarly.  If you haven’t seen the transcripts yet, check them out.  Be forewarned – you’re going to read uncomfortable facts proving assignment fraud, notary fraud, forged signatures, ex parte Orders, prosecuting foreclosures knowing it was the wrong plaintiff, lying to Fannie and Freddie about the status of existing cases, etc., etc. 

Kelly Scott – Stern Employee – Depo Transcript 

Mary Cordova – G&Z Employee – Depo Transcript

Tammie Lou Kapusta – Stern Employee – Depo Transcript

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Florida – one state, two court systems

Today’s article in the Washington Post does a fantastic job of encapsulating the two vastly different ways that foreclosure cases are being handled in Florida courts.  In some circuits, like the Twelfth (Sarasota/Manatee) and Sixth (Pinellas/Pasco), most judges seem intent on ensuring fairness.  In others, though, like the Twentieth (Lee), Seventeenth (Broward), and Fifteenth (Palm Beach), the judges, well, as one foreclosure defense attorney quoted in the article put it – “they are the robo-signers!”  There are exceptions within each circuit (and I’ve seen some bad procedures in the “good” counties), but, generally speaking, the Washington Post is spot-on in its breakdown.  This disparate treatment of foreclosure cases is a trend that I’ve noticed for many months, so much so that it’s often hard for me to believe these counties are part of the same court system.  How can judges in the same state treat foreclosure cases so differently? 

I’ve already given several examples in this blog of what I perceive to be improper procedures utilized by judges, and I will be posting more such examples in the coming days.  As I continue on this process, I’d be remiss not to mention judges who are doing it correctly.  For instance, I’m pleased to read the quote from Pasco Judge Lynn Tepper, who says “I’m not there to grease it, to let anything slide.  We need to be making sure these are done right.” 

Think about that for a moment.  There’s nothing “over the top” about that statement.  This judge isn’t saying “I feel sympathy for homeowners – I want them to get to stay in their homes.”  She’s not saying “the banks are crooked and need to be punished.”  She’s saying:

“we need to [make] sure these [foreclosure cases] are done right.” 

That’s all that most homeowners and foreclosure defense attorneys are asking – do it right.  Isn’t that reasonable?  Why am I not reading quotes like that from every judge?  All too often, the judges are saying, essentially, ”you can’t expect me to review the court file before I finalize a foreclosure.”  I wish such judges realized, when they say such things, they’re encouraging the foreclosure mills to perpetuate the same abuses that got us into this mess.  After all, do you think the mills are going to take the time to do cases the right way if judges don’t make them (and don’t even review the files)?

I sincerely hope the Judges in Lee, Palm Beach, Broward, Hillsborough, and other such counties take a hard look at how things are being done in the Twelfth and Sixth Circuits.  There’s a right way and a wrong way, and spending “a few seconds” per file is wrong.

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