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Higher Numbers of Americans Take Their Lives than During the Depths of the Great Depression

Suicide rates are tied to the economy.

The Boston Globe reported in 2011:

A new report issued today by the Centers for Disease Control and Prevention finds that the overall suicide rate rises and falls with the state of the economy — dating all the way back to the Great Depression.

The report, published in the American Journal of Public Health, found that suicide rates increased in times of economic crisis: the Great Depression (1929-1933), the end of the New Deal (1937-1938), the Oil Crisis (1973-1975), and the Double-Dip Recession (1980-1982). Those rates tended to fall during strong economic times — with fast growth and low unemployment — like right after World War II and during the 1990s.

During the depths of the Great Depression, suicide rates in America significantly increased. As the Globe notes:

The largest increase in the US suicide rate occurred during the Great Depression surging from 18 in 100,000 up to 22 in 100,000 …

We’ve previously pointed out that suicide rates have skyrocketed recently:

The number of deaths by suicide has also surpassed car crashes, and many connect the increase in suicides to the downturn in the economy. Around 35,000 Americans kill themselves each year (and more American soldiers die by suicide than combat; the number of veterans committing suicide is astronomical and under-reported). So you’re2,059 times more likely to kill yourself than die at the hand of a terrorist.

NBC News reported in March:

Suicide rates are up alarmingly among middle-aged Americans, according to the latest federal government statistics.

They show a 28 percent rise in suicide rates for people aged 35 to 64 between 1999 and 2010.

RT reports:

In a letter to The Lancet medical journal, scientists from Britain, Hong Kong and United States said an analysis of data from Centers for Disease Control and Prevention indicated that while suicide rates increased slowly between 1999 and 2007, the rate of increase more than quadrupled from 2008 to 2010, Reuters reported.

Earlier this month, NY Daily News wrote:

The Great Recession may have been at the root of a great depression that caused suicides to soar among middle-aged Americans, a government report speculates.

The annual suicide rate for adults ages 35 to 64 spiked in the past decade, according to a study from the U.S. Centers for Disease Control and Prevention.

And a shaky economy that nose-dived into the worst financial crisis since the Depression may be the biggest reason why.

***

The CDC’s Morbidity and Mortality Weekly Report said the annual suicide rate jumped 28.4% from 1999-2010.

It was the biggest increase of any age group, said the CDC, citing “the recent economic downturn” as one of the “possible contributing factors” for the increase.

“Historically, suicide rates tend to correlate with business cycles, with higher rates observed during times of economic hardship,” the report said.

David Stuckler (a senior research leader in sociology at Oxford), and Sanjay Basu (an assistant professor of medicine and an epidemiologist in the Prevention Research Center at Stanford), write in the New York Times:

The correlation between unemployment and suicide has been observed since the 19th century.

(And see these articles by the Wall Street Journal and the Los Angeles Times.   This is obviously true world-wide.  For example, last year the New York Times reported:

The economic downturn that has shaken Europe for the last three years has also swept away the foundations of once-sturdy lives, leading to an alarming spike in suicide rates. Especially in the most fragile nations like Greece, Ireland and Italy, small-business owners and entrepreneurs are increasingly taking their own lives in a phenomenon some European newspapers have started calling “suicide by economic crisis.”

***

In Greece, the suicide rate among men increased more than 24 percent from 2007 to 2009, government statistics show. In Ireland during the same period, suicides among men rose more than 16 percent. In Italy, suicides motivated by economic difficulties have increased 52 percent, to 187 in 2010 — the most recent year for which statistics were available — from 123 in 2005.)

Indeed, more Americans are killing themselves today than during the Great Depression. Specifically, there were were 123 million Americans in 1930.  The maximum suicide rate during the depths of the Great Depression was 22 out of 100,000  Americans.  That means that up to  27,060 Americans killed themselves each year.

In contrast, the U.S. Centers for Disease Control reports that 38,364 Americans committed suicide in 2010. In other words, 2010 suicides were approximately 142% of suicides during the depths of the Great Depression. (The suicide rate is lower today than during the Great Depression, but – given that there aremore Americans – there are more suicides each year.)

The head of my local county’s mental health services confirmed to me today that there are now more suicides now than during the Great Depression.

The Root Causes: Unemployment and Foreclosure

Why do more people kill themselves during severe downturns?  It’s not just a downturn in the business cycle in some general sense.  It’s more specific than that.

Unemployment and foreclosure are the largest triggers in increased suicide risk.

David Stuckler and Sanjay Basu write:

People looking for work are about twice as likely to end their lives as those who have jobs.

***

Unemployment is a leading cause of depression, anxiety, alcoholism and suicidal thinking.

ABC News points out:

“Joblessness is a risk factor for suicide,” said Nadine Kaslow, professor of psychology in the Department of Psychiatry and Behavioral Sciences at Emory University in Atlanta. “The stress is just overwhelming. … People are freaked out.”

Bloomberg reports:

“The suicide rate started accelerating in 2008, 2009 and 2010 — someone might still be working, but their house is underwater, or they’re working but they’re working part-time,” Eric Caine, the director of the CDC’s Injury Control Research Center for Suicide Prevention, said by telephone. “These things ripple into families. There’s an economic stress.”

NY Daily News writes:

“Most people who commit suicide tend to suffer from major depression, and this vulnerability tends to be brought forth by very stressful situations like losing one’s home or job,” [Dr. Dan Iosifescu, director of mood and anxiety disorders program at Mount Sinai Hospita] said.

NBC News reports:

The American Association for Suicidology says economic recessions don’t normally affect suicide rates.

“Although US suicide rates did increase slightly during the years of the Great Depression, reaching a peak rate of 17.4/100,000 in 1933, subsequent US recessions have not been found to lead to increased national rates of suicide in the period of or immediately following each recession,” the group says.

The latest numbers suggest suicide rates for middle-aged Americans now surpass the peak during the Depression. And there’s another possible explanation.

“There is a clear and direct relationship between rates of unemployment and suicide,” the suicidology group says in its statement.

“The peak rate of suicide in 1933 occurred one year after the total US unemployment rate reached 25 percent of the labor force. Similar findings have been documented internationally. At the individual level, unemployed individuals have between two and four times the suicide rate of those employed.”

The group also raises concern about the home foreclosure rate.

Indeed, it is likely that more people have lost their jobs during this “Great Recession” than during the Great Depression … especially when you look at the masses of people who have given up altogether and dropped out of the work force.

And it is possible that more people have lost their homes through foreclosure than during the Great Depression as well.

No wonder there are so many suicides …

Postscript:  If you suffer from depression, this may help.

Washington’s Blog

Really?

Remember this?

I guess if by ‘luck’ you mean bad, then the old saying applies here.

As Golem said:

If it were just the banks who we had to fight for truth and justice life would be easy. But we are fighting our own political class and our media as well.

We are not all in this together. They are all in it together, against us.  We are on our own.

The bank billed Larry Delassus $13,361 owed by his neighbor, then foreclosed

Debbie Popovich at the garden she worked on with Larry Delassus.

On the morning of Dec. 19, 2012, in a Torrance courtroom, Larry Delassus‘ heart stopped as he watched his attorney argue his negligence and discrimination case against banking behemothWells Fargo.

His death came more than two years after Wells Fargo mistakenly mixed up his Hermosa Beach address with that of a neighbor in the same condo complex. The bank’s typo led Wells Fargo to demand that Delassus pay $13,361.90 — two years of late property taxes the bank said it had paid on his behalf in order to keep his Wells Fargo mortgage afloat.

But Delassus, a quiet man who suffered from the rare blood-clot disorder Budd-Chiari syndrome and was often hospitalized, didn’t owe a penny in taxes.

One of his neighbors, whose condo “parcel number” was two digits different from Delassus’, owed the back taxes.

In a series of painfully tragic events, Wells Fargo relied on its typographical error to double Delassus’ mortgage — from $1,237.69 to $2,429.13 — as its way of recouping the $13,361.90 in taxes Delassus didn’t owe. Delassus, a retiree living on a $1,655 check, couldn’t meet the mysteriously increased mortgage. He stopped paying, and soon was far behind on his mortgage.

Delassus and his attorney did not discover until May 2010 that a mis-entered number had dragged Delassus into this spiral. As court documents obtained by L.A. Weekly show, after admitting its error, Wells Fargo foreclosed on Delassus anyway and sold his condo.

Delassus had to move to a tiny apartment in an assisted-living home in Carson.

Friends say he didn’t die of heart disease that day in court, as the coroner found. He was, they believe, killed by a system so inhumane that it could not undo a devastating piece of red tape the system itself created.

“He was very sensitive,” says close friend Debbie Popovich, 59. “He was a very good person. He was kind of shy, and he had a really good sense of humor — really, he was a very simple guy who just liked to work and do his thing.”

In 1995, Delassus bought condo No. 105 at 320 Hermosa Beach Ave. The building, a white-stucco affair with blue trim, on a busy road with a grassy divider, is unremarkable, but a view of the Pacific glints in through the beach-facing windows.

A neighbor, who gave her name only as Kelly, says Delassus participated in the homeowners association and helped around the complex. But the Navy veteran from St. Louis often was sick from Budd-Chiari syndrome, which made simple tasks difficult and could cause mental confusion.

“Larry loved his home,” Kelly says. “He wanted to die in that house.”

Delassus got the first odd letter from Wells Fargo on Jan. 29, 2009. It informed him that Wells’ tax service provider, First American Real Estate Tax Service, “reported delinquent taxes for the property located at: 320 Hermosa Beach Avenue 105.”

Delassus, told that he owed taxes of $13,361.90 for 2007 and ’08, was baffled. His attorneyAnthony Trujillo, a friend and next-door neighbor, says Delassus was actually six months ahead on his taxes, which he paid directly to L.A. County.

On March 9, 2009, according to court documents, the bank informed Delassus that it was doubling his monthly mortgage payment to $2,429.13 to recoup the $13,361.90 in taxes.

“He came to me and told me what was going on” a couple of months later, Trujillo says. At that point, neither man knew that a bank typo was to blame. In December 2009, Wells Fargo notified Delassus that it intended to foreclose.

Then in May 2010, Trujillo discovered the erroneous fine print in Wells Fargo’s original 2009 letter to Delassus — the “parcel number” off by two digits and belonging to somebody else.

In court documents later, Wells Fargo attorney Robert Bailey of Anglin Flewelling Rasmussen Campbell & Trytten LLP admitted the bank’s mistake: “Wells Fargo paid the amount it determined was owed to the County Assessor: approximately $10,500. This was a mistake. The $10,500 was the tax amount owed on a neighboring property, not Plaintiff’s.” (Bailey did not address the discrepancy between $13,361 and $10,500.)

Bailey added: “In September, 2010 Wells Fargo acknowledged its error in paying the taxes on Plaintiff’s neighbor’s property and corrected it.” By then, however, Delassus was so far behind on his mortgage payments wrongly doubled by Wells Fargo that the bank refused to let him resume his $1,237.69 installments, Trujillo says. He faced a sizable “reinstatement” cost — which is often the past due amount plus fees.

In an unsettling new twist, Delassus couldn’t get Wells Fargo to tell him how much his reinstatement cost was. Later, in a videotaped deposition, Trujillo asks Michael Dolan, a litigation-support manager for Wells Fargo: “So Plaintiff was never provided with the reinstatement amount after the bank discovered its error, correct?”

Dolan responds, “That is correct.”

Delassus and Trujillo — who is a business litigator but not a mortgage attorney — could have sought help from the Consumer Financial Protection Bureau, or from the Comptroller of the Currency in Washington, D.C., says Brian Hubbard, spokesman for the comptroller’s office. But neither man knew about this outside help.

On Jan. 19, 2011, Trujillo videotaped Delassus on the phone, quietly speaking to a Wells Fargo representative. (Wachovia merged with Wells Fargo in December of 2008.) “Wachovia’s never sent me how much my monthly payments would be, if that includes escrow or anything,” Delassus says to the bank. “I’m kind of in the dark here. Reinstatement … what would that be?”

After being transferred to another representative, Delassus says to Trujillo, “The music’s gone, but nobody answers. I think we’re disconnected. Shit. Hello? Hello? Dial tone. Fuckers.” Six days later, on Jan. 25, 2011, Delassus did hear, clearly, from Wells Fargo: It wanted the total payoff amount on the condo, $337,250.40. (Wells Fargo refused to comment on specifics of the case.)

The huge sum was due the very next day, Trujillo says. Instead, he sued the bank on Jan. 26, claiming negligence and discrimination against a disabled person.

On May 13, 2011, shortly after another bad bout of illness, Delassus’ condo was sold by the bank. In a videotaped court deposition later, Delassus breaks down crying. “I came back from the hospital, and that very day, they sold the son of a bitch,” he says. “I’m homeless. I did not have a home. My condo — 16 years, gone. Gone.”

At Carson Senior Assisted Living, to which Delassus moved, he became good friends with Popovich, who had lost her home as well. The duo planted flowers and trees in a small area behind the apartment, complete with a scarecrow and an ornamental owl, where they would talk late into the night.

“He really thought he was gonna get his place back,” Popovich says. “He thought if he told the truth, they could do something for him.” Instead Delassus grew sicker and moved to Tender Liv-in Care in Torrance, owned by Michelle Rogers.

Rogers was in court last December when Delassus, listening to Trujillo arguing his case, slumped over and later died. “It was the most shocking thing I’ve been through in a long time,” she says.

The night before, L.A. County Superior Court Judge Laura Ellison had indicated that she intended to side with Wells Fargo in a summary judgment. Delassus had been very sick, and his speech was slurred — his illness, acting up. But he wanted his day in court, especially since the judge was considering a guardianship request. Instead, as his attorney spoke, somebody yelled, “Call 911!”

His friends and neighbors believe his war with Wells Fargo killed Larry Delassus. Says Trujillo, “The stress just completely messed him up. Once you get in that state, this world is tough on you.”

In a statement to the Weekly, Wells Fargo spokeswoman Vickee J. Adams expressed sympathy over his death. However, she added that, in light of Judge Ellison’s indication that she planned to rule for Wells Fargo, “Given that there was no testimony or evidence to be presented at the hearing, there was no reason for Mr. Delassus to attend, and it is truly unfortunate that he was brought there.”

LA Weekly

Over the last two and a half years, Wells Fargo, like most of the major mortgage servicers, claimed that it had a “rigorous system” to insure that mortgage documents were accurate and complete. The reason this mattered was that there was significant evidence to the contrary. Foreclosure defense attorneys found repeatedly that, for securitized mortgages, the servicer or foreclosure mill attorney would present documents to the court that failed to show the borrower’s note (a promissory note) had been transferred properly to the trust. This mattered not only on a borrower level, but indicated that originators of the mortgage securitizations hadn’t bothered transferring the notes properly to the trusts that were to hold them. This raised the ugly specter of what was called “securitization fail,” that investors had been sold securities that they had been told were mortgage backed when they might in practice not be.

The robosiging scandal was merely the tip of the iceberg of mortgage and foreclosure problems that resulted from the failure to adhere to the requirements of well-settled state real estate law. The banks maintained that there was nothing wrong with mortgage ownership or with the records. All they had were occasional errors and some unfortunate corners-cutting with affidavits. If they merely re-executed all those robosigned documents, all would be well.

Wells Fargo’s own actions say the reverse. It has been doctoring documents in house for over fifteen months for borrowers who are targeted for foreclosure. It was having this sort of work done outside the bank for an unknown period of time prior to that.

A contractor who worked at a Wells Fargo facility in Minnesota reports that the bank engaged in systematic, large scale alteration of mortgage notes and fabrication of related documents in preparation for foreclosure. The procedures the bank used are questionable for a large portion of the mortgages.

A team of roughly 100 temps divided across two shifts would review borrower notes (the IOU) to see whether they met a set of requirements the bank set up. Any that did not pass (and notes in securitized trusts were almost always failed) went to another unit in the same facility. They would later come back to the review team to check if the fixes and fabrications had been done correctly.

Not only is having Wells Fargo tamper with documents in this way dubious in many cases (more detail on that shortly), but amusingly, the bank does not even appear to be terribly competent at this sort of falsification. The bank changed procedures frequently, and did not go back to redo its prior work. In addition, it regularly took loans that appear to have been endorsed properly and changed them as well. Finally, even if the procedures had been proper, the temps were required to meet such aggressive production timetables and were so laxly supervised that it seems unlikely that their work was done well.

This account confirms what foreclosure defense attorneys have reported for some time: that servicers have been engaging in document fabrication for some time. It’s not uncommon for a servicer or foreclosure mill to present “tah dah” documents that miraculously remedy the problems that homeowner attorneys have raised, sometimes resulting in clear proof of fabrication, like two different notes (borrower IOUs) having been presented to the court, each supposedly an original.

But what is striking about this practice is both the brazenness and the scale. Our source was told that Wells Fargo added a second shift to its mortgage review operation in November 2011 [update: it is likely the related doctoring activities were increased correspondingly]; he* did not know when it had been established. Bank employees claimed that some of these operations had formerly been done by outside firms and the cost of doing it in-house was much lower than the cost of doing it externally. Apparently having plausible deniability was too expensive.

We sought comment from Wells Fargo on these allegations and they declined to respond.

Description of Mortgage Doctoring Operations

The document fixing took place at 1000 Blue Gentian Road in Eagan, Minnesota, which the whistleblower described as an enormous facility, and ironically, one at which one of the 9/11 hijackers received flight training.

The whistleblower worked with a team of 50-60 temps, one of the two shifts involved in checking documents before and after the “corrections” were made. The temps came via agencies, were required to have a college degree and pass a security clearance, and were paid roughly $13.00 to $14.50 an hour for eight hours (seven hours of work + breaks). The whistleblower said very few people (under 20%) had prior experience with mortgage documentation. Since Wells has a long-standing practice of promoting temps into permanent positions, the workers had a strong incentive to perform well. Our source worked for the bank for nine months.

His unit would review mortgage documents of borrowers who were described as “in foreclosure” which he understood in practice meant they were delinquent but the foreclosure has not not been initiated. When our source arrived (spring 2012), they were in the process of doubling the work capacity of this effort. Wells Fargo beefed up in the wake of the state attorney general/Federal mortgage settlement of early 2012, evidently seeing it as a green light for more aggressive and systematic document fixing.

This team had two tasks. The first was to review documents that were delivered periodically (often daily) to make sure they were in order. The part we’ll focus on is that they would check the notes to see if the endorsements matched up against what the bank wanted them to look like. (Regular readers of this blog will recall that mortgage notes are endorsed to convey ownership, and in foreclosures, attorneys often challenge the foreclosure if the borrower note does not show a complete and unbroken chain of endorsements to the party initiating the foreclosure). The whistleblower estimated that 99.5% of the notes that he reviewed that had been securitized failed the bank’s tests, and roughly 10% to 15% of the bank owned mortgages were tagged as “fails”.

Mortgage notes that failed this review were sent to a neighboring section. Weeks later, they would come back to the same section with the corrections made, either in the form of new endorsements made to the note, or the addition of an allonge. An allonge is a separate piece of paper, attached (“affixed”) to a negotiable instrument so that more signatures can be added. They were virtually unheard of prior to the robosigining scandal, since in the normal course of business, there would be no reason to use an allonge (the margins and back of a note can be used for signatures). The people in his unit were then to check that this doctoring had been done correctly.

The work environment had a peculiar combination of regimentation and chaos. The temps were given instructions that kept changing and were inconsistent over time (and remember, this worker joined after the state/Federal mortgage settlement was final):

This was a document processing facility where we would go through the files that were already in the foreclosure pipeline, as decided by somebody else, so we would kind of source and classify each file according to, you know, various criteria. First of all, just make sure they’ve got all the parts, like the note and the mortgage and the title policy, and if they’ve got all those and they matched, then see if they’ve got the right information on them, the priority being on the, you know, the final endorsement on the note…

One of the points I was going to make was, when we originally started, the protocol was very distinct for one as opposed to the other. And then rapidly states were passing laws, is what we were told, to change it, so that the number of OD {original document] states being fewer and fewer. Then after the second and third decree there was no distinction anymore. And it seemed like we were supposed to have original documents for everything at that point. So actually a lot of my impression is that there were several things that were a little strange that changed as some of these decrees went through. So like, that’s the second one I was going to mention, is when we were first trained, the way that you treated a standard loan file and a securitized loan file were very, very different, and there was a fairly strict protocol. You had to have a continuous chain of endorsement, had to have a final endorsement to Wells Fargo or one of its affiliates, for a note to pass. But, if it was securitized, you went to this LPS database called CPI, and there would be a list of, you know, however many people had once claimed to own this file, this note. And all of a sudden the continuous chain of endorsement rule went away and you didn’t necessarily use the last one, you would just pick one out of the list that matches your last endorsement and that was good enough.

You can see how irregular this procedure was. Notice how the bank went from having the view that fewer and fewer states required a review and correction of original documents, then reversing itself and deciding all did.

Similalry, if the temps were instructed to match a note to any listed party they could find on a Lender Processing Services database (which relies on manually input data and is thus not reliable), and it was not the final party, that means they are constructing a chain of title that is at odds with the bank’s own touted system of records. If the bank were serious about even getting its fixes right, for securitized loans, it would go to the pooling & servicing agreement and see what it stipulated as the chain of title and work from there. [Update: our source clarified upon seeing the post that once the were given only actual mortgage notes to work with, they were instructed to look for a complete chain of endorsements. That's an improvement over the previous process, but not necessarily sufficient. This is now playing on the lack of patience of judges in understanding how elaborately lawyered-up securitizations were supposed to work. A complete-looking chain might not be the proper or complete conveyance chain as set forth in the relevant PSA. This is basically looking to see if the documents look internally plausible enough to pass muster with most judges, rather than doing it correctly].

It is important to point out that it perfectly OK for the bank to transfer notes it owns (loans owned by Wells Fargo entities, including banks it acquired) any time it wants to prior to foreclosure. Where this gets dodgy is on the securitized loans. These loans were supposed to have been transferred to the securitization trust, through a series of intermediary parties, with a complete and unbroken chain of endorsements on each borrower note. These transfers were to have been completed by a specified cut-off date, with a limited period of time after that for any document clean-up. The trustees on these deals provided multiple certifications to the effect that they had the notes in good order (which would mean the trust properly owned them, that is, all the transfers had been completed as reflected, among other things, in the note being endorsed correctly).

The fact that Wells Fargo is dorking with documents on a mass basis at this late state is an indication of how little of the work that the mortgage industrial complex has kept insisting was done correctly was done at all.

And this was a high-volume operation. Back to our source:

There was a big board that would have inventory in and out for each shift on each day, but that is a little fuzzy. My recollection is that we could move anywhere between 5,000 and 11,000 files a day. A really slow day would be 3,000 for our shift and people might have to go home early. That happened a couple days a week for several weeks the last few months I was there. We generally measured the shift inventory in bins. We would have just a few bins on a slow day, but on a typical busy day there would be 25 to 35 bins full of files to go through.

I’m getting fuzzy on what our hourly targets were. For electronic files I believe we were supposed to do at least 35 or more an hour. I also remember the number 55. I can’t remember if that was a target or not. With paper files I believe we were supposed to do at least 25 an hour, although after two or three months there wasn’t so much discussion of volume and the focus was mostly on accuracy. There were many who did more than this.

These targets don’t seem to square with the daily final tallies I remember people putting in which ranged from 45-130 per person per shift. There were people who would double the target and people who were fairly below it.

Let’s take the midpoint of his 45-130 files a shift range, which is 87.5. They worked 7 hour per shift. That’s under 5 minutes a file. That is to check not only that all the basic documents were there, but also to go into the CPI database, and possibly also into a backup spread sheet if the desired information was not in CPI, and look for a match.

The objective was to have the final endorsement be “to blank” or what is more typically described as “in blank”. The whsileblower gave this example of how a note was supposed to look once it was corrected:

I was checking to see if whoever had written out the new endorsements really had copied what was in CPI word for word, letter for letter. After checking the first couple with increased scrutiny, it became clear that they had copied them absolutely verbatim, only in a new endorsement to blank.

Before it would be:

Pay to the Order of

Bear Stearns Trust, Pass through certificate holders 2003, VII.

Without Recourse
U.S. Bank

Joe Blow,
Vice President, U.S. Bank

According to our training, that would be an incomplete and therefore invalid endorsement as the
chain did not end with the final noteholder endorsing it to blank.

In order to remedy that, they would add an additional endorsement:

Pay to the Order of

Without Recourse
Bear Stearns Trust, Pass through certificate holders 2003, VII.

Billy Cobham
Vice President, Wells Fargo
By power of attorney

In this way, the note endorsed to the trust and stopping (an incomplete chain as I was taught at Wells) would be modified into a complete chain, The trust would endorse it to blank and that endorsement would be added by Wells power of attorney, I assumed, but was never directly informed, by way of its authority as servicer for the trust.

Now what is peculiar about this is that our source reports that the notes were almost always endorsed to the trust (description includes Trust Series Name, Trust Number, Year). This is not only a permissible endorsement, some legal experts think it is the only sort of final endorsement that is proper.** So Wells also appears to be expending a great deal of effort doctoring documents that may be perfectly kosher (assuming the chain of title up to the trust is unbroken, something our source was not instructed to examine).

None of the higher ups questioned the revisions to procedures:

Generally, however, the whole process was a matter of ever changing orders and flowcharts to follow. There was next to nothing in the way of explanation even if you asked. It is my impression that the work directors didn’t have the slightest idea about the bigger picture, what was going on or that there might be a problem.

And for a substantial period of time, the priority appeared to be production, not accuracy***:

They would periodically restructure the flow chart to improve productivity. There were also a group of seven or eight auditors who were hired as “team members” out of the temp pool and effectively served as managers and who even did training near the end. They were the best informed regarding the process and the most hands on. They would also be involved in fixing oversights in the process flow charts. Their primary job was auditing assigned samples of each employee’s production per week and compiling statistics on them for the managers to see. These weekly stats were released in an email every week with all employees on the shift ranked by name in terms of productivity (files per working hour), and later in terms of accuracy.

Our source stresses that the procedures became more “reasonable” over time, in terms of having more coherent internal logic and being less production-driven, but it still raises the question of the apparent failure to correct earlier documents (which were presumably used in foreclosures) and whether even the later “improved” processes were adequate or even permissible.

Troubling Legal and Practical Issues

It is not clear whether Wells Fargo could make these changes legally to private label (non-Freddie and Fannie) securitized mortgages. While our source believes that Wells may have gotten a power of attorney from the trustee to make these changes, the PSA does not appear to convey this authority to the trustee.**** And why would it? Making sure the notes were endorsed properly was something the trustee repeatedly certified it had done years ago.

A party cannot convey authority to another party that it does not possess. So these document changes may be a complete legal fail.

But even if they could be construed to be permissible, the process is clearly hugely flawed. The temps were inexperienced, and not well supervised, and under pressure to produce at unrealistic levels. They relied on a database of questionable accuracy. Procedures were changed so often and so radically that some clearly had to be wrong. And our source reports some of his colleagues waved through documents he would have failed.

So we have document doctoring on top of widespread fraud. Welcome to property rights and records in America. If you are a borrower, you have to be punctilious in living up to your contractual commitments, or you can expect to have your lender use your lapse to maximum advantage. But if you are a bank, the government and courts will cast a blind eye to virtually any error. Anyone with any sense will avoid being in debt, which will ultimately be to the detriment of commerce. But it will take the authorities a long time to recognize that their efforts to save the system rather than reform it will only weaken it further.

_____
* We refer to all whistleblowers as male irrespective of gender.

** The overwhelming majority of mortgage securitizations elected New York for its governing law, precisely because its trust law is settled. But it is also very rigid. For a transfer to a New York trust to be valid, the assets need to be transferred to the trust, not just the trustee. However, this issue has rarely been raised in foreclosures, since it would add an large cost to hire New York trust experts to provide supporting testimony. Since pretty much all PSAs allowed for endorsement in blank, that is accepted in courts; the fight is usually over whether the chain of endorsements is complete and whether the final party is the one who is in court trying to foreclose. In fact, our source indicated: “They were almost alwaysn endorsed to a trust and then the endorsement chain would just stop there. ” So bizarrely, Wells Fargo was doctoring documents that were correct!

*** The bank apparently started emphasizing accuracy more later in 2012, but with no redo of the earlier work, this appears to (at best) be an effort to shut the gate after the horse is in the next county. And as indicated, their ideas of “accuracy” appear subject to question.

**** We contacted a securitization expert on this matter, who (not surprisingly) could not recall and did not find language in a PSA that authorized this sort of post-trust-closing endorsement. Via e-mail:

So far, this is all I could find about the trustee signing title over to the master servicer (from section 3.14 of the PSA):

Upon the occurrence of a Cash Liquidation or REO Disposition, following the deposit in the Custodial Account of all Insurance Proceeds, Liquidation Proceeds and other payments and recoveries referred to in the definition of “Cash Liquidation” or “REO Disposition,” as applicable, upon receipt by the Trustee of written notification of such deposit signed by a Servicing Officer, the Trustee or the Custodian, as the case may be, shall release to the Master Servicer the related Custodial File and the Trustee shall execute and deliver such instruments of transfer or assignment prepared by the Master Servicer, in each case without recourse, as shall be necessary to vest in the Master Servicer or its designee, as the case may be, the related Mortgage Loan, and thereafter such Mortgage Loan shall
not be part of the Trust Fund.

But notice this section relates to a “Cash Liquidation or REO Disposition” and not in preparation for commencing a foreclosure action.

One might try arguing from Section 3.01:

The Trustee shall furnish the Master Servicer with any powers of attorney and other documents necessary or appropriate to enable the Master Servicer to service and administer the Mortgage Loans. The Trustee shall not be liable for any action taken by the Master Servicer or any Subservicer pursuant to such powers of attorney or other documents.

But again, we have a problem of legitimate authority. If the note has not been conveyed to the trust properly, altering original mortgage documents arguably does not fall in the scope of servicing and administering the mortgages. Indeed, if the notes were not conveyed to the trust by the cutoff date, they are not the property of the trust and trustee lacks authority to take action. This is precisely the scenario that no one in the mortgage industry wanted examined closely, and why they’ve gone to such lengths to pretty up document trials to indicate otherwise.
Yves Smith – Naked Capitalism