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How ‘Flawed’ Was the Paperwork?
Posted By Barry Ritholtz On October 4, 2010 @ 12:30 pm In Credit,Foreclosures,Legal,Real Estate | Comments Disabled
Gretchen Morgenson’s front page NYT piece  is your must reading for today.
She lets the facts speak for themselves; Calling these failures “problems” understate the case dramatically, but WTF: Its front page NYT. All of these errors “involve documents that must be submitted before foreclosures can proceed legally.“ (Sweet!) The flawed legal practices are so prevalent that numerous banks have voluntarily undertaken reviews of their legal procedures and document processing.
I have a longer piece out on this general subject tomorrow, but I had to point out the highlights of Gretchen’s piece:
• GMAC Mortgage, JPMorgan Chase and Bank of America are running internal investigating; Other Lenders and Loan Servicers are halting foreclosure proceedings;
• Documents attesting to crucial, specific information were routinely signed by employees who say they never verified the info;
• Lenders or loan servicers often start foreclosure process without being able to produce documentation showing they have the legal right to foreclosure, (standing).
• Banks present legal affidavits, signed by an employee of a legal services firm acting as an agent for the lender or loan servicer. This shows the banks have ownership of the note, and allow foreclosures to proceed
These legal attestations are often dubiously prepared, and are frequently invalid:
• GMAC said it was halting foreclosure proceedings in 23 states because of problems with its legal practices.
• GMAC employee testimony stated they signed 400 affidavits per day for GMAC without reading them or verifying that the information in them was correct.
• Herman John Kennerty, a Wells Fargo Mortgage loan administration manager, he typically signed 50 to 150 foreclosure documents a day (he did not independently verify the information to which he was attesting).
• False verifications of data included:
-amounts owed by borrowers
-legal notarization that predate document prep
-notarizations so far from where docs signed it was impossible for notaries to have witnessed the signings (as the law requires).
-Counterfeited/Forgery of official names
This has led to:
• Multiple banks all claiming right to foreclose same property, a result of a murky trail of documentation and ownership.
• In Florida, a sample of foreclosure cases (12th Judicial Circuit) showed 20% of summary judgment involved deficient documents, according to chief judge Lee E. Haworth.
• Harry Rapkin, a Florida judge overseeing foreclosure, dismissed 61 foreclosure cases do to bad are falsified docs.
• Attorneys general in at least six states, including Massachusetts, Iowa, Florida and Illinois, are investigating improper foreclosure practices.
• Secretary of state of Ohio referred “notary abuse by Chase Home Mortgage” to federal prosecutors for investigation.
As noted this morning, the real estate / financing industry has brought the same machine-like technical prowess that they used to automate the process of underwriting mortgages to a similar automated foreclosure process. Is it any surprise that the results of this are similarly disastrous?
Flawed Paperwork Aggravates a Foreclosure Crisis 
NYT, October 3, 2010
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2010/10/how-flawed-was-the-paperwork/
URLs in this post:
 front page NYT piece: http://www.nytimes.com/2010/10/04/business/04mortgage.html
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