Unsealed court-settlement documents reveal banks stole $trillions' worth of houses

boing
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Actually its worse. In fact, the mass destruction of the US land title system is even worse than stealing homes. I’m sure you’ve read the stories of people being foreclosed who don’t even have mortgages. This happened because of a database owned by a company called “Lender Processing Services”. LPS’s database, which has no audit trail and is accessible by any of the lenders’ or mortgage servicers’ agents, is what banks are now using to record ownership and mortgage records. This of course stood hundreds of years of state real property law on its head, and makes it impossible to determine who owns basically any property that has been input into the system. There is no good way to determine real property status anymore once it has entered the LPS system.

The banks didn’t just lose some paperwork, they destroyed our land title system. And if you think paperwork doesn’t matter, it is the very material of the law. If I can’t prove standing to sue someone I can’t sue them. If I destroyed the paperwork and dumped all the records into a sloppy and un-auditable database, I cannot prove standing. If you want to pretend that banks have greater rights with regard to standing than normal people, then say so. And if you think destroying the land title system isn’t an even worse crime then there is no point in talking.

If a bank cannot prove standing to foreclose (and makes frequent and egregious errors that destroyed many families’ economic fortunes), then forges documents that back up its standing, and then successfully forecloses because many courts defer to bank attorneys, that’s not the same as stealing properties. Its much, much worse.

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That’s ok. If the Banks get in trouble they can also depend on Congress to bail them out. It’s not like anybody is going to face prosecution or anything.

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This story reminds me of a bit that Lewis Black did a while back:

Father and two sons run Adelphia. It’s a cable company, and they take from the company a billion dollars. A billion. Three people. Three people. Took a billion dollars. A billion. WHAT WERE THEY GONNA DO?! START THEIR OWN SPACE PROGRAM?! "Lets send a monkey to Mars, Dad."If that weren’t enough, they took 13 million dollars of company money, and used it to build a golf course, in their own back yard. What amazes me, is the people that work for that company and knew that they did it, that they didn’t rise up as one and slay them. I never understood why the people of France chopped off Marie Antoinette’s head. Now I fuckin GET IT.

Watch it in full color.

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Since corporations are people now, can we stop calling them banks and just start calling them robber barons again? Because this is seriously what we’re looking at, just as collective corporate personhood instead of actual titled people.

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Clearly NOT a patriot.

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The focus is ALWAYS on the wrong people. We, the people who should be the focus, have to MAKE our case and TAKE our rights. Gay people didn’t suddenly come upon the right to marry because all the straight people said, hey, wtf? this isn’t right, let’s fix that. Slaves didn’t get free because of white people’s guilty conscience. Women didn’t get the vote because of sympathy from guys who wanted to give away half their power. Same thing here. If we want to be free of bank suppression, the NSA spying on us, or Presidents from left and right who lie through their teeth, then we’ll have to just get fed up and TAKE WHAT’S OURS. It’ll have to come to that. It always does.

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They created fraudulent paperwork to “prove” their right to houses.

When cops fabricate evidence, would you object that that isn’t really framing the suspect, because the odds are good that he really is guilty?

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Sad how a hyperbolic headline about stealing trillions allows most to dismiss a fairly serious charge of failure to keep adequate records dealing with the most important financial transaction that most of us will ever have.

There need to be penalties for widespread carelessness, but I’d be fairly outraged if Cory equated individuals who failed to keep adequate records of their assets with “stealing” them.

God knows there are enough cases where banks have been involved in actual malfeasance beyond negligent record keeping that pretending that this case is the case to end of all cases seems self-defeating.

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There are so many misconceptions in this post and the ensuing discussion…

Note that contrary to Cory’s post about “transferring title for homes” and “stealing” houses, this has nothing to do with who owns the homes and everything to do with who holds the promissory note and mortgage (i.e., to whom the borrower/homeowner is obligated to repay the loan, and therefore who has the right to foreclose if the borrower/homeowner stops paying).

Obviously forging documents is totally unacceptable. And I agree with some other commenters that the lenders have an obligation to keep proper track of things.

But when the lenders all agree who holds the loan, how is it theft when the holder of the loan exercises the rights everybody agrees he has to foreclose? It’s fraud upon the court if the lender presents forged documents as proof that he has the right to foreclose. And the lender should be sanctioned accordingly (hence the $95MM settlement) and the court should step up its vigilance to force lenders to provide solid proof that they have the right to foreclose before they are allowed to do it. But once the lender follows the correct procedure and goes back to get any missing documents re-executed (most agreements include clauses that require the parties to re-execute upon request), it’s not theft for the lender to foreclose. It’s just sad.

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Ygret, you’re mistaking LPS with MERS (Mortgage Electronic Registration Systems). MERS is the database you’re thinking of. It’s a paperless electronic registry of dubious legality and poor accuracy. Basically the banks thought they could save some money by ditching paper documents and having one streamlined system that ignores the simple fact there are 50 property laws in the US (one for each state). But property laws do require a paper trail, so when it’s time to foreclose the banks ask LPS to “recreate” the non-existing paper documents. LPS is in other words a forgery mill.

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See, I told you deregulation was a great idea.

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Not just when it’s time to foreclose but when it’s time to sell, no?

How do I know the bank I pay my mortgage to actually “owns” my house i.e. has the paperwork?

Is there some recourse to make the bank prove they are the legitimate lien holders aside form going into foreclosure?

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You are correct, my apologies, I sometimes get LPS and MERS confused. The story is the same though. I recall that LPS’s forgery division was called DocX – they even had sample forged documents on their website to entice bank attorneys to use their services. They of course shut that all down once people started to become aware of what they were doing. For anyone interested in discovering more of the chicanery LPS gets up to here is a long quote from a nakedcapitalism piece on a lawsuit against LPS:

But the new and more troubling material is the mess LPS has made of bank records. LPS employees were given password controlled access to borrower payment records and could and did alter those accounts. These passwords were routinely and widely shared, in contravention of good practice. And since everything at LPS was organized around maximizing throughput rather than doing anything correctly, the errors were widespread:

LPS employees were rewarded for their speed, and this resulted in the violation of security protocols and significant and pervasive errors in the default services that they were providing (e.g., the application of mortgage payments to incorrect accounts). Even when these problems were discovered by the Company’s internal auditors, LPS swept them under the rug. Indeed, LPS knowingly concealed errors in files from clients, network attorneys, and courts to keep clients happy and to ensure that a finger could not be pointed at LPS.

Now consider the question of the integrity of borrower records. Because LPS was so casual about password control, a large number of employees could and did:

….access mortgage records of borrowers and alter them by changing entries, reversing transactions, adding transactions, and moving funds in and out of suspense accounts.

And the company was not terribly concerned about accuracy:

There was a huge volume of ledgers that had to be created and problems in loan files that had to be researched and unraveled by CW [Confidential Witness] 16 and his colleagues. These problems included, among others, missing payments, misapplied payments from other loan files, and payments that should have been attributed to other loans…

CW16 stated that they were “only allowed to look at an issue for two minutes, or five minutes tops.” His supervisors and managers did not want CW16 and his fellow employees to spend time on any loan unless it was incredibly complex. However, they frequently could not finish it within five minutes. According to CW16 “a lot of people didn’t understand the financial side and just winged it.

CW16 estimated that 20% of the motions for relief of stay (a filing to allow the bank to foreclose even though the borrower is in a Chapter 13 bankruptcy) were incorrect. This is markedly above the 10% level mentioned by the US Trustee in a Gretchen Morgenson article last weekend (although his comment could be read to allow for even higher rates).

If you think this is bad, the level of errors in borrower files is worse:

According to CW16, on top of the 20% of files with phantom referrals, approximately another 35% of files had some problems in them. Those problems varied, and included among others, an ARM that had improperly adjusted up, a failure to properly account for a borrower’s principal and interest payments, and a failure to properly attribute payments between pre-petition and post-petition that led the banks to try to collect pre-petition obligations they were not permitted to pursue.

Note that the nature of these errors is serious, and from what we’ve seen in various lawsuits and in the press, the numbers are often large, and that’s consistent with the US Trustee’s findings."

Read more at Former LPS Employees Allege 30% to 78% Error Rate in Borrower Mortgage Records, Contradicting Banker/Regulator Cover-Up | naked capitalism

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You might be able to get them to cough up whatever title transfer and mortgage note documents they have in their possession, but you’d probably need a lawyer to do it. I tried to get them for my mother-in-law’s house and they told me I wasn’t entitled to see them, which was of course total bull. Without a lawyer, and possibly the threat of a suit or an actual suit, they will just fob you off. The thing is, even if they show you what docs they have, that won’t be proof of anything. And title companies are actually adding new language to their title insurance policies in cases where title is muddled that dumps liability for the ownership history portion of title onto the mortgagor. Its a complete mess and the problem will be with us for decades at least.

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Its not the lenders who have to agree. The lender who is foreclosing has the responsibility to prove they have standing to a judge in order to sue for foreclosure. Without the properly executed note there is no proof of standing. Its that simple. And it is not legal to “re-execute” these documents. That is a euphemism for forgery. Its also not just one or two documents that would need to be re-executed, but the entire chain of title, which includes all assignments and sales of the mortgage and note that have occurred since it was originated. Who even has a record of the chain of title to be able to know who the chain of title parties are? Not MERS. There is a reason that mortgages and notes have been filed with county clerks and stored in fireproof safes for hundreds of years.

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Actually, the headline is not hyperbolic at all. If you consider the fact that the housing bubble, which was created by bankers, was an $8 trillion bubble, and that Americans lost trillions when the bubble burst, its actually accurate. They defrauded and collapsed the entire world economy and then received $13 trillion in bailouts for the favor.

And this case is not the only case, but its potentially a big one considering how the Obama Administration has let banks get away with a vast array of crimes, including thousands or hundreds of thousands of forgeries/frauds upon the court, destroying the land title system, tricking people into foreclosures because mortgage servicers earn more foreclosing than modifying mortgages, and many, many others. The banking system is one big criminal enterprise at this point, the biggest in history. Any case that begins to chip away at this edifice of criminality is important.

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Many, many people would have no problem with that at all. I guess liberty won’t defend itself, will it?

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Unless you can push your “big lie” onto the unwilling audience time and time again, overstating your case rarely works for anyone except the already converted. Now this is certainly a viable strategy when you are simply serving an existing customer base the pap that they want to hear (c.f. Fox News), but it’s a highly ineffective strategy if you are actually trying to educate new people.

Now it’s possible that Cory only wishes to write for a community with essentially pre-vetted views, making money on the site advertising, etc. However, if, as I suspect, he’s actually trying to educate the public via the web site, then using headlines that actually match the content in spirit is going to get more consideration than a patently exaggerated headline that causes the real content of the article (and make no mistake, this is a bad mess-up by the banks and deserves publicity) to be ignored.

It’s like reading a headline about thousands dead, only to find out that a dozen have died (but thousands might over the next 50 years!). A dozen deaths is headline worthy on its own, but is now likely to be ignored.

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I agree fully that if somebody presents forged documents to a court to show they have the right to foreclose, it’s fraud.

But re-executing a document is not forgery if the parties re-executing it have the legal authority to do so. As someone who works in a related field, we go to great lengths to get all the signature pages correct and to store the original promissory notes in secure places. But mistakes get made, documents get lost, etc., and sometimes it’s necessary to go back and have a document re-executed. That’s one of the reasons why we usually have “further assurances” clauses in the documents.

Heck, the mortgage on my own home even contains a clause requiring me to re-execute documents if the bank loses them. My mortgage lender sold my loan to a big bank shortly after closing. A couple months later the originator came back and asked me to re-execute a document that the big bank couldn’t find (even though I’m quite confident I handed it over at the closing). That’s how it’s supposed to work: the holder of the loan audits their file, finds it’s incomplete, requests the originator provide the missing piece, and the originator gets it for them.

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And yet you have no idea what damage the chain of title issues will ultimately amount to. One thing for sure is its going to cost a lot more than $1 trillion. At an average price of $200k per house, that’s 5,000,000 houses. The number of foreclosures that have already been completed since 2008 dwarfs that number. And we are nowhere near done. Given that pretty much every property that had a loan securitized has chain of title issues, we are also going to be dealing with chain of title problems for homes with mortgages in good standing, mortgages that are paid off, and even houses that don’t have mortgages for decades to come. Now tell me again where the hyperbole comes in.