It’s clear that the banks aren’t much chastened by the foreclosure scandal that erupted last fall and which threatens to cost them tens of billions of dollars.
An American Banker investigation today shows that several banks are still fraudulently backdating documents to foreclose on homeowners. And it’s not the first to show this. Last month, an outstanding Reuters probe by Scot Paltrow (a former neighbor of mine and Dean Starkman’s at The Wall Street Journal) showed similar behavior (ADDING: The Associated Press had a similar piece earlier that day, as commenter JenniferM points out).
These stories raise serious questions for the Obama administration and states attorneys general led by Iowa’s Tom Miller who have been rushing to settle and release the banks from liability for fraud. How can you release folks who’ve repeatedly shown that they’ll ignore the law and even recent settlements promising they’ll obey it?
The Banker’s lede is straightforward and tough:
Some of the largest mortgage servicers are still fabricating documents that should have been signed years ago and submitting them as evidence to foreclose on homeowners.
The practice continues nearly a year after the companies were caught cutting corners in the robo-signing scandal and about six months after the industry began negotiating a settlement with state attorneys general investigating loan-servicing abuses.
Several dozen documents reviewed by American Banker show that as recently as August some of the largest U.S. banks, including Bank of America Corp., Wells Fargo & Co., Ally Financial Inc., and OneWest Financial Inc., were essentially backdating paperwork necessary to support their right to foreclose.
Reuters was even more thorough, finding thousands of made-up documents:
In recent months, servicers have filed thousands of documents that appear to have been fabricated or improperly altered, or have sworn to false facts…
Federal bank regulators signed settlements in March with 14 loan servicers — banks and other companies that perform tasks for mortgage investors such as collecting payments from homeowners and when necessary, filing to foreclose. The 14 firms promised further internal investigations, remediation for some who were harmed and a halt to the filing of false documents. All such behavior had stopped by the end of 2010, they said.
Of these companies, Reuters has found at least five that in recent months have filed foreclosure documents of questionable validity: OneWest, Bank of America, HSBC Bank USA, Wells Fargo and GMAC Mortgage.
How can it possibly be legitimate to backdate documents, have fake officers from defunct companies sign them, and submit them to the courts? Here’s one of the servicers quoted by the Banker:
Sand Canyon quit the mortgage business in 2009 and sold the loans to American Home Mortgage Servicing Inc., where Hopkins now works — but she still signed the documents as an officer of Sand Canyon. An H&R Block spokesman calls Sand Canyon a “discontinued business.”
Philippa Brown, a spokeswoman for American Home, says the transfer of the loan took place at the closing of the securitization in 2006 and the assignment that was recorded in 2010 was a “confirmatory assignment, memorializing the transfer that had previously occurred while Sand Canyon was still in business.”
I believe the legal term for that is “bullshit.” If the transfer “previously occurred” then why does it need to “re-occurred” years later by a company that doesn’t exist anymore—without a headsup to the court it’s intended to deceive? Reuters:
Securitization lawyers say it is technically impossible for a defunct company to directly assign a mortgage over to another owner.
If you haven’t followed the foreclosure scandal story closely, you might be baffled that banks would continue to do the same things that caused such an uproar just a year ago and which they promised regulators they would stop. Read David Dayen on why they’re still up to the same stuff:
And you see, the banks HAVE to fabricate documents. Because they destroyed the private property system through improper and sloppy securitizations and lost or missing mortgage assignments during the bubble years, and as such they cannot prove standing to foreclose without lying. Robo-signing is a crime, but it’s also a cover-up for a much bigger crime, which involves MERS and improper mortgage transfer and securities fraud. The robo-signed, forged, fabricated documents are the smokescreen being used to foreclose and get the real problem off the books. Banks are trying to wriggle off the hook by saying they are merely “memorializing” past actions with the fake documents. Some courts aren’t buying it; the pooling and servicing agreements stipulate that all assignments showing transfers must take place within 60 days, not years later through “memorialized” actions.Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at email@example.com. Follow him on Twitter at @ryanchittum. Tags: American Banker, Foreclosure Scandal, Mortgages, Reuters, Robosigning