The snowball keeps rolling. On Friday (again waiting until the end of the week for the big news), Bank of America halted foreclosures across all 50 states — more lenders no doubt soon to follow their action. The New York Times reports:
The plan swept states with some of the highest foreclosure levels, including California, Nevada and Arizona, into a swelling crisis over lenders’ flawed paperwork that had been mostly confined to 23 other states that require judicial review of foreclosures.
As a result, Fannie Mae is halting sales to new owners of foreclosed homes it bought from BofA.
They’re scrambling.
Meanwhile, over at the White House, President Obama, via a “pocket veto,” blocked legislation that would have made it more difficult for homeowners to challenge foreclosure. Interesting development. The Senate passed the bill by unanimous consent.
The bill requires federal and state courts to recognize out-of-state notaries — notary fraud is at the heart of many of the foreclosure suits. Why would the Senate be quickly, quietly and unanimously passing legislation that would make it more difficult for homeowners to challenge the foreclosure fraud rapidly revealing itself? And why is Obama equally quietly declining to sign it? Very interesting indeed.
Ellen Brown, in her report today, reiterates the banks’ flaws are not simply poor paperwork:
Those errors go far deeper than mere sloppiness; they are concealing a massive fraud. They cannot be corrected with legitimate paperwork, and that was the reason the servicers had to hire “foreclosure mills” to fabricate the documents. These errors involve perjury and forgery – fabricating documents that never existed and swearing to the accuracy of facts not known.
You want to see for yourself? Yves Smith at Naked Capitalism posted this price sheet for “document recovery services” offered by Lender Processing Services’ DOCX service. “Document recovery services” is code for mortgage document fabrication. You can “create missing intervening assignment” for $35, “create note allonge” for $12.95, “create lost note affidavit” for $12.95, or hey, why not simply “recreate entire collateral file” — all the documents the trustee needs to have, including the original of the note (borrower IOU), copies of the mortgage, securitization agreement and title insurance — all recreated for you for $95.
So wake up and smell the coffee. The story that banks have been trying to sell has been that document problems like improper affidavits are mere technicalities. We’ve said from the get go that they were the tip of the iceberg of widespread document forgeries and fraud. This price sheet provides concrete proof that the practices we pointed to not only existed, but are a routine way of doing business in servicer and trustee land. LPS is the major platform used by all the large servicers; it oversees the work of foreclosure mills in every state.
And this means document forgeries and fraud are not just a servicer problem or a borrower problem but a mortgage industry and ultimately a policy problem. These dishonest practices are so widespread that they raise serious questions about the residential mortgage backed securities market, the major trustees (such as JP Morgan, US Bank, Bank of New York), … and the inattention of the various government bodies (in particular Fannie and Freddie) that are major clients of LPS.
Serious issues indeed. Yves sums it up astutely:
In a mere decade, we managed to allow a “free markets” ideology on steroids to gut investor and borrower protection. The result is a train wreck in US residential mortgage securities, the biggest asset class in the world. The problems are too widespread for the authorities to pretend they don’t exist, and there is no obvious way to put this Humpty Dumpty back together.
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