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Archive for the ‘Mortgage Industry’ Category

My oh my what’s this?!

Attorney General Chris Koster today announced that the state of Missouri and Lorraine Brown, former President of DocX, LLC, have reached a plea agreement.  Under the agreement, Ms. Brown will plead guilty to one felony count of forgery, one felony count of perjury, and one misdemeanor count of making a false declaration.

Brown will be sentenced to a term of imprisonment of not less than two years and not to exceed three years in the Missouri Department of Corrections.

Ms. Brown is the former President of the company DocX, LLC.  During the period of March to October 2009, DocX, at the direction of Brown, instituted a surrogate signing policy whereby employees signed, not their name, but the names of other employees on thousands of mortgage documents that were notarized and filed across the country.  Prior to 2009, similar signing practices were also employed at DocX.  Brown concealed these practices from her clients, the national mortgage servicers, and the parent company of DocX.  The practices of DocX were brought to national attention by a “60 Minutes” report and resulted in several major lenders temporarily suspending foreclosures in 2010.

And that’s not all!  It be Federal too….

The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.

The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court.  Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime.  The date for sentencing has not yet been set.

“Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis,” said Assistant Attorney General Breuer.  “She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others.  Appropriately, she now faces the prospect of prison time.”

Ah, look what showed up…

So now about all those destroyed chains of title and alleged “mortgage trusts” that actually have no mortgages in them….

I’m going to reprise a Ticker from 2011-10-18, which you can read here if you want the original, but in a political context.

There was once a nation that was comprised of fish.  The fish lived in a pond that was 64×64 in size, or 4096 square units of surface area.  As with all fish they survived on dissolved oxygen in the water, which came to the water by exchange with the atmosphere above.  Plants grew in the water, receiving their energy from the sun while recycling the waste emitted by the fish as nutrients, and the fish ate the plants. All was well in the nation of fish.

But the economy of fish was limited by its growth.  Some of the bottom where the fish lived was rather rocky, and not much suited to cultivation of aquatic plants.  Some of the bottom was fertile, and beneath still more were various rare and natural treasures, such as energy sources that the fish could use for manufacturing.

One day a bright fish that worked for a bank called “Goldfishbank” got the idea that since plants were food, and more growth is better, the nation would be served by faster “growth.”  He introduced to the pond a species of lilly that reproduced very rapidly.  In fact, it produced a new lilly once each day.  He began by placing just one lilly of one unit of size, or 1/4096th of the surface of the pond, in the water.

The next day there were two, and the fish nation cheered.  Then four, and the fish nation demanded that this fine fish be President.  Then eight, and all was even better in the world.

There were, however, some fish that became alarmed, for they had not been sleeping in school.  They knew, as well, that their very survival depended on the exchange of oxygen with the air above, and that absent this exchange all of the fish would surely die.

The great prosperity that appeared to flow, however, led the scholars to be shouted down.

Unfortunately the great prosperity resulted in the price of fish dwellings, foods and fuels rising precipitously.  The credit created by all of this growth, which had heretofore appeared to be impossible, made everyone feel wealthy.  After just eight days what was 1 lilly had become 128; both great and permanent prosperity appeared to have blessed the fish.

Two days later the pond was 12.5% covered with lillies.

But in the middle of this prosperity there was much corruption and theft.  The interest rates charged to lend money were corrupted by some of the fish banksters, who reasoned that they were merely making very smal changes in what they reported, and due to the leverage they employed, reaping billions of profits.  This they did by stealing pennies from each fish per day.  Nobody would jail them.

There were other fish that were involved in lending for dwellings, and they too scammed the public.  Some of the lenders collapsed, yet they paid only small fines while most of the fish suffered monstrous losses, with many losing their homes.

Still other parts of the fish economy were involved in health care, and they got laws passed to make differential pricing, cost-shifting and other monopoly behavior protected, for this was their way to riches.  Soon the fish nation spent twice as much on health care as a percentage of its economy as all the other fish nations, but all these monopoly protections, enacted into law, were not seen as the corruption they were.

Unemployment became a problem and the fish nation saw its standard of living decline.  This was puzzling, for the proponents of the new lily had said that such prolific growth would lead to permanent prosperity.  There were many who claimed that the lily was simply not prolific enough, and that means must be found to spur even more lilies to grow.

The three major political parties sparred over the unemployment and economic malaise.  The two largest ones offered that taxes should be increased on the most-fortunate fish and that taxes should be decreased for all fish, respectively.  But neither put forward a plan to cut down the size of the government, which was sapping an increasing amount of the economy.

The third party decided to state that it should cut the size of the government by 43%.  But it refused to address the main growth drivers of the government, that being the medical industry’s special protections.  Nor did that party appear to give a damn about all the scams and frauds, which had stolen monstrous amounts of wealth from all the fish.

Soon the political debate within that third party turned to whether fish should be able to smoke pot, which was currently prohibited under penalty of law, and whether a fish named Steve should be able to marry one named Larry.  Some fish believed this was a civil right and of the utmost importance, while others believed it was Satanic.

Yet these were the only points of political debate on which this third party focused, instead of on the financial institutions that had skimmed off all the “prosperity” that had been promised to the fish nation by the Goldfishbank and others in the financial industry, along with the medical industry that had lobbied for their special protections and which were bankrupting the fish nation’s government.

A few of the third party analysts saw that in point of fact the lily issue was soon to kill all the fish and the entire fish nation economy.  They were poo-pooed and called alarmists, for the sun was still visible in the sky above, and their rising stridency was called “divisive” or that “if you simply changes your approach you could actually influence people.”  They were even told that their commentary was “self-righteous.”

But that commentary, labeled “divisive” and in fact dismissed with “that ends our conversation and damages both our working relationship and friendship” was based the simple fact that while just 12.5% of the pond was covered, the entire fish nation was only three days from extinction, and the last two days had been wasted arguing over gay marriage and dope smoking instead of addressing the impending and mathematically-certain disaster.

Now we got something interesting going on….

Sometimes law is complex, nuanced, difficult.  Other times it’s black and white…you just read the words, look at the facts and the answer is unavoidable.  Such is the case with the simmering dispute over the fact that the notes that are part of nearly every residential foreclosure case are not negotiable instruments.  Oh sure, too many courts won’t take the time to consider the argument and…just yesterday I heard an appellate court argument where the judges just kept repeating the mantra, “this is a negotiable instrument” without ever doing any analysis at all and without any finding of that “fact” from the trial court.  The attorney needed to stop the appellate judge right there and say, “No Your Honor, it’s Not A Negotiable Instrument”.

Matt then goes into a rather complicated and technical discussion of what all this means.  I’ll try to simplify it.

A negotiable instrument is (under the UCC Section 3) something that involves only (1) the payment of money, and (2) possibly the payment of interest.  It can be payable on demand or a specific time.

Because it is an instrument that has no real interpretation available as to whether the terms were complied with or not (it’s just about money) these can be passed around as if they were cash by simply “negotiating” (signing) the back.  You can pass a check around like this; it is a negotiable instrument because it is payable on demand and it is only an instrument for a given amount of money.

A mortgage inherently contains other conditions, such as “you will maintain insurance”, “you can prepay without penalty (or with one)”, “the following things can be charged to you other than principal and interest”, and “the note might be accelerated (due in full) if I do (or don’t do!) x, y or z.”

None of these are simply the payment of money on a given schedule or upon demand, coupled with a possible payment of interest.  All involve other conditions, which make the note non-negotiable.

The reason it’s not negotiable is that the formal process of assignment transfers not only the note but also the obligations of the parties, including the beneficiary — who might have obligations.  It is thereforemuch more formal than something that is “negotiable”.  Assignments require formalities like notaries and such, because everyone has to agree – - not just the borrower.  And if the formalities are not followed then the assignment simply never happened and title to the note in question remains with the original party.

The import of this decision, assuming it stands, is significant.  It means that the “defenses” to all the fraudclosure crap may just evaporate, as once you force recognition of all of those formalities if they didn’t happen then the guy standing in front of the judge asking to steal your house fails, as he’s not the right person to be making the request — that is, he’s a thief instead of a forecloser!

And once you force these institutions to come to court with true and complete documents you find that they can’t — they have played “fast and loose” with the documents, they don’t have them at all, they try to cheat and forge them, and in some cases it appears they are trying to collect twice on the same instrument!

You can bet this ruling will be challenged, but there is hope so long as we have some real jurists that remain on the bench.  And as Matt explains, attempting to use these arguments “pro-se” is dangerous,but the fact remains that there is progress in this decision.

Discussion (registration required to post)

Interesting presentation with slides and video can be viewed here…

Related educational information:

1. Robosigners and Other Servicing Failures: Protecting the Rights of RMBS Investors
2. Association of Mortgage Investors Letter To JPMorgan Trust Administration RE: Notification of and Request to Address Pervasive Issues in RMBS Trusts
3. Ocwen Scoops Up Saxon Servicing Rights
4. Invitation: County Sheriffs’ Role in Protecting Individual Liberties
5. Live Webcast Wed May 4th 9AM EDT | Presentation to Michigan House of Rep on Mortgage Fraud by Bill Bullard and Curtis Hertel, Jr.