A strong article in the Washington Post makes it so clear that even a CNN anchor can understand it: A huge portion of the Fraudclosure mess was by design.

These weren’t erroneous ‘i’s that were not dotted and ‘t’s that were not crossed; It was a mad rush to do yet another extremely important legal and financial process recklessly: As fast and cheaply as possible.

Gee, how could that ever go wrong?

“Millions of homes have been seized by banks during the economic crisis through a mass production system of foreclosures that was set up to prioritize one thing over everything else: speed.

With 2 million homes in foreclosure and another 2.3 million seriously delinquent on their mortgages – the biggest logjam of distressed properties the market has ever seen – companies involved in the foreclosure process were paid to move cases quickly through the pipeline.

Law firms competed with one another to file the largest number of foreclosures on behalf of lenders – and were rewarded for their work with bonuses. These and other companies that handled the preparation of documents were paid for volume, so they processed as many as they could en masse, leaving little time to read the paperwork and catch errors. [BR: aka the purpose of legal document review]

And the big mortgage companies overseeing it all – including government-owned Fannie Mae – were so eager to get bad loans off their books that they imposed a penalty on contractors if they moved too slowly.

The system was so automated and so inflexible that once a foreclosure process began, homeowners and consumer advocates say, there was often no way to stop it.”

The penalty for the people behind this should be that any future legal, medical or accounting services they personally require are done in the same manner: As fast and cheaply as possible.

The chain of criminality — and don’t let people tell you otherwise, this legal malfeasance demands prosecution — runs the full gamut of players:

“The financial incentives show that the problems plaguing the foreclosure process extend well beyond a few, low-ranking document processors who forged documents or failed to review foreclosure files even as they signed off on them. In fact, virtually everyone involved – loan servicers, law firms, document processing companies and others – made more money as they evicted more borrowers from their homes, creating a system that was vulnerable to error and difficult for homeowners to challenge.”

How bad was it? Consider the David Stern law firm — in the lead to be the first Florida Fraudclosure lawyer to move into a “charming, cozy room” at the graybar hotel:

The law firm of David J. Stern in Plantation, Fla., for instance, assigned a team of 12 to handle 12,000 foreclosure files at once for big financial companies such as Fannie Mae, Freddie Mac and Citigroup, according to court documents. Each time a case was processed without a challenge from the homeowner, the firm was paid $1,300. It was an unusual arrangement in a legal profession that normally charges by the hour.

The office was so overwhelmed with work that managers kept notary stamps lying around for anyone to use. Bosses would often scream at each other in daily meetings for “files not moving fast enough,” Tammie Lou Kapusta, the senior paralegal in charge of the operation, said in a deposition Sept. 22 for state law enforcement officials who are conducting a fraud investigation into the firm. In 2009 alone, Stern’s law firm handled over 70,000 foreclosures.”

I hope you are keeping track of the weasels who keep insisting that this is not pervasive or systemic, and there was nothing here but human error . . .

Read the entire WaPo article here.


For foreclosure processors hired by mortgage lenders, speed equaled money
Ariana Eunjung Cha and Zachary A. Goldfarb
Washington Post, October 16, 2010

Category: Credit, Foreclosures, Legal, Real Estate

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

70 Responses to “Foreclosure Fraud: “Systemic, Industrywide, Pervasive””

  1. Sechel says:

    Barry, could it be that the banks having advanced P&I (having been pressured these last two years not to foreclose) now find that the equity behind the mortgage has been eaten up and now find themselves in a state of panic?

  2. “Pressured” not to collect?

    What does that mean?

    Banks are run by people who who have legal fiduciary obligations to shareholders. Its worth noting that all the rcent trouble has been driven by taking “shortcuts” to serve their shareholder obligation — not abrogate it.

    I’ve always found the “Pressured” arguments to be worthless and not reflective of how financial institutions operate in the real world.

  3. MayorQuimby says:

    Wake me up when an actual ARREST occurs. Until then, my cynicism shall remain at record high levels.

  4. Sechel says:

    Considering the behavior the banks these last several years, Captain Renault is called for…
    “I’m shocked, shocked to find that gambling is going on in here! ”

    So who plays Captain Renault?

  5. Tarkus says:

    Are they more amenable to doing mods now? But how can you do a mod if you can’t find the note and prove you have the right to mod anything?

  6. Mannwich says:

    Oh, I’m keeping track alright. Some of those “weasels” are regulars here on TBP. Keep hammering them with facts. They’ll go away eventually. Maybe.

  7. Pocket QQ says:

    I wonder what kind of damages (if any?) a current homeowner, with an outstanding credit score would have if they can show prejudice in a refi, by either being a key part of a troubled and still performing security, or part a jumbled sea of blank deeds. How are loans being unwound from these securities? Shouldn’t a bankers bonus be suspended if their Balance sheet isn’t whole. Where is the accountability for that? I see good honest Americans stuck in rates that now make bankers salivate, padding bonuses of design.

    Something tells me we are all going to get a great backwards education in securitization due diligence. Let’s see the math!

  8. The Window Washer says:


    Use the servicing agreement and have the homeowner sign new documents without ever finding the original.

  9. Petey Wheatstraw says:

    The headline to the WaPo article says the banks acted out of expediency in order to increase gains (Headline: Speed equaled money in foreclosures). While money is the driver for these criminals, the slipshod and illegal securitization of mortgages was to pass off to unsuspecting investors falsely-rated loans the banks knew would fail. Motive is important. The motive here was to defraud.

  10. Petey Wheatstraw says:

    The Window Washer Says:

    “Use the servicing agreement and have the homeowner sign new documents without ever finding the original.”

    Then, they’d find the original (or create one out of thin air), and the borrower would be on the hook for both. Also, they’d have to prove title, and I don’t think they can do that.

  11. The Window Washer says:

    The can has been kicked down the road long enough. Time to stomp on it.

    Keep hammering on this Barry, you got the good fight on this one.

    It’s the rule of law, pure and simple. If we did this we’d be in jail. This is all post crisis, it was last week, last month. They knew they we’re breaking the law.
    It’s not about people thrown out of their house it’s about the crime. Damages? Maybe. Jailtime? Yes.
    Should we put the person that changes the locks in cuffs? Yes.
    Should we put the person that notorized remotely in cuffs? Yes.
    Should we put the person theat “created the file” in cuffs? Yes.

    When Fannie can’t get anyone in any state to process paper things will get straitened out real quick and no lower level people will be charged. But damn if those perp walks of working class people just trying to get by won’t shake things up.

  12. The Window Washer says:


    The rework will show the first being released or it will read as an amend to the original. You don’t need the original to do that?
    To release a lien you don’t need the original. A lender can send a document to the title company releasing all interest with that lien release. Close the new product.
    Was the documentation from earlier loans on the table when you bought or refied a home?

  13. Lyle says:

    Actually I think the issue is the same here as in other areas cost as the primary driver at the cost of doing things right (or safely in other issues) . Just as in BP’s case a number of the engineers had objectives of reducing cost and doing things for less, I suspect that management here had the same objectives. In both cases reduced costs means something else has to give, the vision that processes are all full of waste is not correct. So the banks reduced the costs because thats what the management was incented on, just like the upper level bankers were incented on volume, who cares if the folks qualify. The thing is it so much easier to measure costs that it makes the evaluation process much less painful.

  14. louis says:

    So who is the first Rep to break ranks with his bank buddy and do what’s right? Anybody listening, it’s election time.

  15. AGORACOM says:

    Barry et al,

    what concerns me is that neither Democrats nor Republicans have made this an election issue. They should have been on this a week ago – but could plead the necessity for more information.

    Over the last two days, however, the cat has come right out of the bag. Yet, nothing from the politicians.

    I really would have expected Obama and the Dem’s to hammer this issue in an effort to get “the people” back on their side by both protecting their homes and going after Wall Street criminals.

    Yet, nada.

    If neither party comes out strong about this in the next 48 hours, then you can bet some serious back room deals are being made as Wall Street buys its way out of this.

    Let’s watch.

    George … The Greek …. From Canada

  16. AGORACOM says:

    @Louis … looks like you and I are on the same page.


  17. Lost in the apathetic comments by most industry people is that we’re not just talking about “people who took out mortgages that they couldn’t afford”.

    A lot of folks had no problem with their mortgages until the Great Recession (caused by the foreclosERS in the first place) ended their employment. If I borrow $250,000 from Countrywide, and the Countrywide’s loan-apalooza contributes to the apocalyptic credit freeze that forces the company I work for to close, am I being reckless?

    fuckin animals still don’t understand what they’ve done.


  18. super_trooper says:

    My bet is for a halfass investigation, small fine and no arrests.
    This will prolong the time it takes for the (i) housing market to return to “normal” (ii) the banks to clean up their balance sheets.

  19. wisedup says:

    would anyone care to bet that the banks are NOT immediately detroying all loan records once the foreclosure is completed?

  20. bobabouey says:

    For those who think these activities are excusable because, in many (perhaps most) of the cases, the foreclosed party was legitimately in default, its worth distinguishing the parties suffering the harm, and the criminal and civil elements of the breach.

    The individuals, law firms and banks who committed or participated in the fraud are most likely guilty of various crimes and offenses – perjury, fraud, professional malpractice, etc. There are various state and federal crimes that could be implicated.

    The aggrieved party in those cases are the courts and the American people generally – hence Barry’s reference to the threat to the “rule of law”. These crimes are independent of whether or not the underlying foreclosure was itself justified or not, as they undermine the rule of law and various societal covenants. I.e. Mark Fuhrman pleaded guilty to perjury; whether or not OJ actually killed his wife is irrelevant to that crime.

    In terms of damages, the parties that are foreclosed on may or may not have claims. If the party being foreclosed on was in default, and would have been foreclosed on anyway, I’m not sure they have any legitimate damages, a critical element to any civil claim.

    Parties who were incorrectly foreclosed on most likely do have damages – loss of the use of their house, damages to the house during foreclosure (eg the guy who’s house was left with putrefying fish when his freezers lost electricity), etc.

    Damages are generally not meant to be punitive, but depending on the severity and claims, there may be some, and in practice, purported “damages” for things like emotional defense are often de facto “punitive” claims, where punitive damages aren’t available (i.e. juries and even judges may award them even if they don’t believe there were really emotional damages if the perpetrators’ acts were considered sufficiently intentional and worthy of de facto punishment).

    So, there is nothing in conflict between wanting to see guilty parties punished for the fraud, while also not being sympathetic to those parties who did in fact default on their mortgages and would have ultimately been foreclosed on. The crimes / civil offenses are distinct, and the aggrieved parties are distinct as well, i.e.

    - people in default legitimately subject to foreclosure who suffered limited damages – limited damages

    - people not in default who were illegally foreclosed on – most likely some actual damages, and potential for punitive damages / Intentional infliction of emotional distress type de facto punitive damages

    - society / courts in general who suffer generally when the rule of law is abused – criminal punishment

  21. maspablo says:

    Let’s be honest , whether its nikes Made by 3rd world workers for 1$ an hour or 400$ hour associate attorneys who make 30$ an hour our capitalism is all value added.its all an illusion of quality and efficiency n proiductivity to give the” best price” to the final consumer . Imagine what.a real estate closing/foreclosure would cost if the professional did there duties to the letter! Whatever.a bank does for the consumer the actual work will always be done by the lowest paid employees with the least trtaditional expertise !

  22. maspablo says:

    I’m of course disgusted ! But , then again , my first real job as a. Retail equity broker not one person read the wsj or ny times , a few did read the daily news betting lines though ! To me. It seems the most knowledgeable n intelligent people are always used for the face of the business to get the sale ! Not build or service the product ! Because that’s where the money. Is

  23. tradeking13 says:

    Here’s some weasel-liciousness:

    Sorry Folks, The Put-Back Apocalypse Ain’t Gonna Happen

    Why not?

    Because the politicians will not let the financial stability of the largest bank in the nation be threatened by contractual rights. Not when there’s an easy fix available that won’t cost taxpayers a dime.

    Here’s what is going to happen: Congress will pass a law called something like “The Financial Modernization and Stability Act of 2010” that will retroactively grant mortgage pools the rights in the underlying mortgages that people are worried about. All the screwed up paperwork, lost notes, unassigned security interests will be forgiven by a legislative act.

    The put-back crisis is not driven by economics. It is driven by legal rights. And there’s simply zero probability that the politicians in Washington are going to let Bank of America or Citigroup or JP Morgan Chase fail because of a legal issue.


    BR: Carney is a usually reliable fade . . . While I don’t think its an apocalypse, how is the WH (or anyone else) going to prevent pension funds from getting paid on bad Strucutred product? Its gonna cost more than a few sheckels . . .

  24. [...] article on Foreclosure Fraud via Big Picture has this quote from the article “Law firms competed with one another to file the largest [...]

  25. Herb2 says:

    Bailouts were provided, bonuses were paid, and campaign contributions were made. What more do you want? A Tea party?
    Humpty Dumpty fell off the wall and exposed the innards, and the maggots feast.
    “When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean—neither more nor less.”
    “The question is,” said Alice, “whether you can make words mean so many different things.”
    “The question is,” said Humpty Dumpty, “which is to be master that’s all.”

  26. Robespierre says:

    Can we use some kind of Eminent domain for the government (state) to take over any foreclosure that the bank can’t provide the note?. There is a trail of payments (that must have stopped in case of delinquent) that shows the home owner is now delinquent. The bank tries to foreclose but no note. The court foreclosures using eminent domain and the house goes into auction. The money from the auction is use to pay back taxes, expenses etc. The rest goes into an escrow account. If the bank ever shows up with a valid note that money goes to it. Otherwise after a few years the money goes to the municipality where the house is located. Will this be legal way of actually moving foreclosed houses without moral hazard for the current tenant? I know is probably a lot of crap but just like a monkey I throw out there

  27. “…Why Wasn’t It Done Right in the First Place?
    That raises the question, why were the notes not assigned? Grayson says the banks were not interested in repayment; they were just churning loans as fast as they could in order to generate fees. Financial blogger Karl Denninger says, “I believe a big part of why it was not done is that if it had been done the original paperwork would have been available to the trustee and ultimately the MBS owners, who would have immediately discovered that the representations and warranties as to the quality of the conveyed paper were being wantonly violated.” He says, “You can’t audit what you don’t have.”

    Both are probably right, yet these explanations seem insufficient. If it were just a matter of negligence or covering up dubious collateral, surely some of the assignments by some of the banks would have been done properly. Why would they all be defective?

    The reason the mortgage notes were never assigned may be that there was no party legally capable of accepting the assignments. Securitization was originally set up as a tax dodge; and to qualify for the tax exemption, the conduits between the original lender and the investors could own nothing. The conduits are “special purpose vehicles” set up by the banks, a form of Mortgage Backed Security called REMICs (Real Estate Mortgage Investment Conduits). They hold commercial and residential mortgages in trust for the investors. They don’t own them; they are just trustees.

    The problem was nailed in a class action lawsuit recently filed in Kentucky, titled Foster v. MERS, GMAC, et al. (USDC, Western District of Kentucky). The suit claims that MERS and the banks violated the Racketeer Influenced and Corrupt Organizations Act, a law originally passed to pursue organized crime. Bloomberg quotes Heather Boone McKeever, a Lexington, Ky.-based lawyer for the homeowners, who said in a phone interview, “RICO comes in because the fraud didn’t just happen piecemeal. This is organized crime by people in suits, but it is still organized crime. They created a very thorough plan.”

    The complaint alleges:…”

    (cross-post from nearby thread..)

  28. willid3 says:

    MEH I think it was simple. cut the costs. get the bonus.

    and I wouldn’t at all be surprised if a lot of work was done in India or China. after all if your cutting costs thats where the business lemmings are going.
    and as I recall it, one of the professions that was under the gun for being exported was lawyers. and lower level legal assistants. odd huh?

  29. Petey Wheatstraw says:

    The Window Washer,

    I think the underlying problem is that the titles and mortgages were separated during the securitization process. That is to say, the mortgage and the title, in effect, had different owners. If I understand the finer point (and there’s no saying that I do), this caused a title defect (as the title and mortgage must stay together).

    To make matters worse, in many cases, title transfer and/or loan docs were never created, or were modified post-ratification, or were destroyed (intentionally, or not) or lost (ditto), so no one knows who, if anyone, holds the title to the underlying asset. No title, no standing to foreclose or do a loan modification. No loan docs, no standing to foreclose or do a loan modification. How can you have a lien against an asset you do not hold title to?

    Why would anyone enter into a mortgage modification with a party that doesn’t have the legal standing to sell the underlying asset?

    Imagine this: You’re sitting at the settlement table to modify your mortgage, and the loan officer pushes a pile of amendment docs over for you to sign (or, alternately, a process server shows up at your home with foreclosure papers — that you haven’t been paying your mortgage is a given). You notice that the documents refer to docs that aren’t attached, or that your original loan docs differ substantially from those offered by the loan officer or served on you (let’s say they refer to different banks). You’d proceed with settlement? You wouldn’t question the legal standing of the foreclosing party in court?

    As is being discovered, the banks have used forged docs in order to try to put the titles and loan docs back together for the sole purpose of foreclosing on the asset they can no longer prove they are entitled to foreclose upon, as they can’t do so, legally (as a condition of the securitization process, which allows a tax pass-through), without taking a major, major hit financially, and immediately implicating themselves in a larger criminal conspiracy.

    Also, in your scenario, the older loan docs might not be present at settlement, but you can bet, before this fraud-fest, somebody had originals and certified copies, and that the chain of title was unbroken.

  30. Petey Wheatstraw says:

    Robespierre Says:

    Can we use some kind of Eminent domain for the government (state) to take over any foreclosure that the bank can’t provide the note?

    I don’t think the banks would allow the government to do that, as it would eat into their bonuses.

  31. jjay says:

    The looting will continue until our currency is worthless.
    The beatings will continue until morale improves.
    That is all, carry on.

  32. w says:

    The frightful thing in all this is that what we see here is an other example that demonstrates that it is worth breaking the laws when you are a corporation. In this instance, you knowingly illegally foreclose 1,000 homes and may have to pay compensation when caught 4 or 5 times. It’s worth it! You have no respect for and break the law but in effect corporations will avoid punishment.

    There is only one possible outcome to this evolution: US citizen are going to be citizens of a lawless (for them) nation.

    Citizens have already unknowingly lost their right to vote as the voting mechanism know takes place through campaign contributions and lobbying, not via the ballot box.

    We are witnessing the death of the US democracy.

  33. w says:

    One more thing, the point I wanted to get at: by rejecting a foreclosure moratorium the authorities, who know very well what is going on, show that they approve of this behavior.

    Pointing out to them the lawlessness of these banks is not going to change one thing, they already know!

  34. jpmist says:

    I keep wondering why it’s taken two years for this shoe to drop.

    I had heard of bad CMO mortgage paperwork back in late 2008. (Google “missing mortgage document” starting 10/2008 and you’ll find quite a few articles.) Apparently the banks reacted to the problem early on with their usual arrogance and expedience instead of proper procedure and the issue eventually dropped out of sight until the stench got too strong.

    The quote below is from a web post dated 10/2008 @ http://www.newgeography.com/content/00305-financial-innovation-wall-street%E2%80%99s-false-utopia

    “Critically missing from the market for CMOs was the lack of a standard for the issuance. In more than one case, when a CMO investor attempted to foreclose on a property for mortgage delinquency, courts found insufficient documentation to support the CMO’s lien on the property. Without legally binding “receipts” of ownership, CMOs
    have had insufficient real backing — producing results we are still trying to cope with.”

    I repeat, written in October 2008. This issue isn’t new. It’s been flying under the radar and has been papered over for 2 years.

    This time, the CEO’s of the banks and mortgage servicers can’t hide behind the excuse of “no-one could have predicted this” as they did with the CDO meltdowns. They had to know they were acting improperly when they chose to outsource their foreclosures to third parties foreclosure mills thereby distancing themselves from responsibility for how improperly the foreclosures were done.

    Why these’s CEO’s aren’t doing “perp walks” baffles me. . .

  35. The Window Washer says:

    I’m speaking in generalities here.
    You make a lot of good points but I think you’re confusing a title and a clear title. You can put all kinds of things on a title without perfecting them, meaning recording it against the property.
    Many people think the system lenders use on homes is the “way things have to work” becuase that is all they every see.
    Multiple investors in a property with multiple levels of standing and claims can be on a title. Think of a large complex real estate developlement. Most people never see how these are done and each one is a custom. If you go through all of the correct steps there is rarely a problem with who has what.

    If the “parties” involved want to exchange or reorganize the interest the can.

  36. MinnItMan says:

    ” Each time a case was processed without a challenge from the homeowner, the firm was paid $1,300.”
    These fees are regulated (Fannie sets the state fees allowed) and then competition pushed them down even further. These firms can be cash cows, but they do an assload of volume. And I guaranty you, until recently, someone near the source was getting a cut of that $1300. Maybe do an audit of the default service companies?

    Btw, opposing counsel told me that when there is a challenge, they get a budget of $50K. They love me. They really love me. They even chuckle when I make stupid references to cattle cars and gas ovens. Resistance is futile, I mean excellent!

    Wish my clients appreciated me more. I don’t get paid squat. Can somebody spot me rent?

  37. bobc7i says:

    Tammie Lou Kapusta — ironic. Kapusta is Polish for cabbage. Clearly she was working for a bunch of cabbage heads masquerading as lawyers.

  38. ToNYC says:

    The Mother of all class action suits await the fraudclosure conspirators.

  39. NormanB says:

    The 2008-09 bailouts by the FRB and the Treasury Dept which save the stock and bond holders will not again be able to be used for the mess that the foreclosure infidelities caused. The Public will not stand for another round of corporate socialism especially when it wasn’t ‘the markets’ that did it but their own ineptitude. Color this very, very ugly for these banks and deservedly so.

  40. hue says:

    foreclosure mills

    “Now, the banks had hired ‘foreclosure mills’…law firms that specialized in foreclosures…in order to handle the massive volume of foreclosures and evictions that occurred because of the housing crisis. The foreclosure mills, as one would expect, were the first to spot the broken chain of titles.

    “Well, what do you know, it turns out that these foreclosure mills might have faked and falsified documentation, so as to fraudulently repair the chain-of-title issue, thereby ‘proving’ that the banks had judicial standing to foreclose on delinquent mortgages. These foreclosure mills might have even forged the loan note itself…

    “Wait, why am I hedging? The foreclosure mills did actually, deliberately, and categorically fake and falsify documents, in order to expedite these foreclosures and evictions. Yves Smith at Naked Capitalism, who has been all over this story, put up a price list for this ‘service’ from a company called DocX…yes, a price list for forged documents. Talk about your one-stop shopping!

    “So in other words, a massive fraud was carried out, with the inevitable innocent bystanders getting caught up in the fraud: the guy who got foreclosed and evicted from his home in Florida, even though he didn’t actually have a mortgage, and in fact owned his house free -and clear. The family that was foreclosed and evicted, even though they had a perfect mortgage payment record. Et cetera, depressing et cetera.

  41. Tarkus says:

    hue said:
    “To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.”

    So the idea is the mad scramble to foreclose was to process as many ahead of the curve before this was publicized?

    Sort of like “information arbitrage”. Problem now is that it looks a bit like systemic processes were set up to perjure the courts. Guess they’ll all go back to court to straighten it out.

  42. bobabouey says:

    hue said:

    ““To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.”

    I believe this just isn’t true. If the chain of title is broken, then best case the borrower would still owe payments to the last party on the unbroken chain of title. Then all of the people later in the chain of title have various legal options to claim against that last party in the chain, and ultimately to clean up the broken chain.

    It is a mess, but it just isn’t true that this mess means homeowners, delinquent or not, no longer have to pay their mortgages. Apparantly, the note is a requirement for foreclosure, but it is not the only requirement to establish a legal debt. Borrowers who take that position will doubtfully find the courts to be receptive.

    The people encouraging non-payment of loans where there is a broken chain of title are snake-oil peddlers no different than the legion of rip-off artists still convincing random idiots that a federal income tax isn’t required for a whole variety of stupid theories.

  43. Winston Munn says:

    But if we put all the productive people in prison, who will run the country? Who is John Galt?


    BR: A fictional character created by someone with an extremely limited understanding of Human psychology

  44. VennData says:

    The homeowners all got together, see – in a union, see – and MADE the banks use robosigners.

    – John Galt

  45. beaufou says:

    “To repeat: if the chain of title of the note is broken, then the borrower no longer owes any money on the loan.”

    This is the first thing that came into my mind when I heard about this mess and what knuckle-heads cannot understand.
    This is going to be as messy as it gets and it will challenge American democracy at its core.

  46. wunsacon says:

    I feel no sympathy for at least some of these particular self-professed victims of fraudclosure:


    9 kids. Couldn’t afford the house. (Any causality there?) Took out what sounds like $500k of equity (on top of the original $500k purchase price). Now, they’re “breaking and entering”, blaming everybody else, and looking to score some more lucre. That ain’t right.

  47. Thor says:

    Manny – “Oh, I’m keeping track alright. Some of those “weasels” are regulars here on TBP. Keep hammering them with facts. They’ll go away eventually. Maybe.”

    Yes indeed. Where are our resident corporate apologists tonight?

  48. holulu says:

    Is Obama’s Attorny General going to lift a finger and start a meaningfull investigation about this? I doubt it. O’ has been huge dissapointment.

  49. Winston Munn says:

    I, too, doubt Obama’s Justice Department will do anything – it’s hard to continue the rape, pillage, and plunder when your best plunderers are in jail.

  50. [...] Modern finance collides with the legal system.  (WSJ also Big Picture) [...]

  51. Andy T says:


    I don’t think many people here were arguing that this wasn’t a serious problem, even us non-Barry acolytes who don’t “dance around your maypole” were writing that this was serious.

    The question is this: now what? What are the damages? What is the “net” problem here? How many people are actually being evicted that should NOT be evicted? My guess is there are probably thousands (out of millions) of titles that are probably tainted post-foreclosure process because of the “reckless” way in which certain banks like (Gov’t Owned) Fannie and Freddie crammed the process. My other guess is that the actual number of people who received eviction/foreclosure notices who should NOT have received such notices is much less. I HOPE it’s less than a 1,000. You solicited a “crowd-query” to your devotees to scour the internet in search of “false evictions” and I think the crowd came up with about 10-15 legit cases of folks who received foreclosure filings they shouldn’t have. Of those numbers, a large % were able to stop the mistaken foreclosure process before anyone came to move them out.

    So, who are the “victims” of the illegal foreclosures (robo-signers)?

    Is it the homeowner who is in default and not paying the mortgage? The actually seem to be a beneficiary of the ineptitude of government run/controlled banks like FNM/FRE.

    The real victims are the folks who are going to be a) the buyers/owners of the tainted Title in the Foreclosure process; and b) the folks who are being evicted on property they are not in default on.

    In terms of both victims a&b here, the victims will end up spending time and resources to remedy the problem. In that regard, I like the Nevada law the calls for triple the damages on property as a result of mishandled evictions. That seems like it should be a useful deterrent against a sloppy mortgage process.

  52. number2son says:

    bobabouey: an excellent summary of the issue. This is fundamentally about the rule of law. Would that we could all pin your comments to a wall for future reference.

    wunsacon: of course every unprincipled character in this travesty, no matter what side of the transaction they happen to find themselves, is going to try to exploit it for their own good. That’s what happens when people put money ahead of principle. And it has been the hallmark of the housing crisis from the very beginning.

    Finally, and at long last, people of good will are shouting loudly and clearly that enough is enough.

  53. VennData says:

    BR asks “…I hope you are keeping track of the weasels…”

    Oh, I am. Theses are direct quotes from the same day’s issue of this weekend’s WSJ, the “thought leader” in logic behind the conservative view point on Foreclosuregate, and all things:

    Why Liberals Don’t Get the Tea Party Movement

    “…the proliferating classes in practical ethics and moral reasoning. These expose students to hypothetical conundrums involving individuals in surreal circumstances suddenly facing life and death decisions…”


    What the Tea Partiers Really Want

    “…To understand the anger of the tea-party movement, just imagine how you would feel if you learned that government physicists were building a particle accelerator that might, as a side effect of its experiments, nullify the law of gravity. Everything around us would float away, and the Earth itself would break apart…”


    The ever-amusing Rupert Murdock’s Fox news Corporations Wall Street Journal.

  54. wunsacon says:

    Andy T, IMO, the biggest “victims” here are possible home buyers who watch the shytstem artificially restrict supply once again at a time when housing should be dropping another 20%-40% from current levels. Of course, that’s my subjective view.

  55. AGORACOM says:


    @Wunsacon @Andy … I don’t think the outcry is about “victims” as much as it is about anger over Wall Street getting a guaranteed pass no matter what they do. It is sickening.

    First, Wall Street sold crack to homeowners. Wall Street gets TARP and mega-bonuses, homeowners get evicted.

    Now, Wall Street acts fraudulently for the sole purpose of generating profits and then kicking people out of their homes. It appears Washington will find a way to give them a pass, while homeowners continue to get evicted.

    Your country has been handed over to the highest bidder. As a Canadian, I find it sickening to watch. As Americans, I can’t believe you guys aren’t burning Wall Street and the White House to the ground.

    George … The Greek …. From Canada

  56. Andy T says:

    Agoracom– very difficult to know what to even say in response to that sort of commentary. What ‘crack’ was sold to main street? How many people were forced to take on more debt than they could handle?

    What ‘profits’ are firms going after by foreclosing on properties? That’s one of the more non-sensical statements uttered among all the non-sensical statements in Barry’s progressive comments section. Having to foreclose on a property worth a lot less than the loan value is a huge hit to banks–they’re take the loss and moving on.

    Canada? Take a long look in the mirror before you start casting aspersions here. You have one of the best unfunded armies of all times…just south of the border. Also, go check out what you’re doing to your own environment up there in the tar sands. It would blow your mind.

    Peace out.

  57. Sunny129 says:


    “..Two hands without a brain, not even aware of the reasons they had to be bailed out. This was best highlighted by an event that generated plenty of late-night chuckles last fall, when Wells Fargo sued … Wells Fargo.Wells Fargo wanted to foreclose on a condo unit which had multiple mortgages attached to it. Wells Fargo also owned one of those second mortgages. So Wells Fargo spent money to hire a law firm and file suit against the irresponsible lenders at Wells Fargo. Then, Wells Fargo spent money to hire a different law firm in an understandable effort to defend Wells Fargo from the vicious legal attack coming from Wells Fargo. The second law firm even prepared a legal statement for Wells Fargo which called into question the dubious claims being made by Wells Fargo. Sadly, Wells Fargo won the case,crushing the hopes of Wells Fargo.

    As business reporter Al Lewis wrote at the time, “You can’t expect a bank that is dumb enough to sue itself to know why it is suing itself.” So goes the unprecedented wave of foreclosures that has swept across the country since the housing bubble popped. Mortgages have been bought, sold, and repackaged so many times through such an opaque process that banks have no idea who owns what. When they foreclose, they simply guess, making up the documents and information necessary to do so…”


  58. Kralizec says:

    The penalty for the people behind this should be that any future legal, medical or accounting services they personally require are done in the same manner: As fast and cheaply as possible.

    I understand that Mr. Ritholtz’s point is about equality and reciprocity and is not to be taken merely literally; nevertheless, it seems good to note that the penalty he proposed would not edify the people, as it would be too drawn-out and boring even to maintain the people’s attention. So, the topic of penalties having been brought up, I offer that the Americans have lived a very long time without the sobering spectacle of swift, bloody executions for enormous crimes. If men seem to have lost the belief in the deadly seriousness of their legal work, it seems to be because they cannot imagine a penalty of death or even pain for the misconduct of their work. Nor is it reasonable to imagine that the courts of these times, with their slow, stultifying “due process” and bland punishments, will make an about-face and suddenly make bloody examples of criminals whose crimes, though enormous, are themselves bland. Yet it seems the men whose work is to maintain the legal forms would recover an awareness of the importance of legal forms, if they were to witness the red, wet alternative to good order with their own eyes.

  59. AGORACOM says:

    @Andy T asks

    1. “What ‘crack’ was sold to main street? How many people were forced to take on more debt than they could handle?”

    RESPONSE: Wealthy people like you may not understand this but when you go offering virtually free money to poor/NINJA people, they’ll suck it up faster than you can give it. That is the crack sold by Wall Street.

    Said another way, if a bunch of Ethiopian kids developed diabetes after eating years worth of junk food offered up by self-serving food companies, would you look at them and say “nobody forced you to eat pop and chips all day?

    At least my position is that both borrowers AND lenders must suffer equally. You appear to have an elitist attitude that only borrowers should suffer – when we all full well know that lenders used the masses to create MBS for investors around the world.

    You are acting as if these were conventional mortgages that are being foreclosed on – when we further know full well that neither borrower nor lender read the fine print.


    2. ” What ‘profits’ are firms going after by foreclosing on properties? That’s one of the more non-sensical statements uttered among all the non-sensical statements in Barry’s progressive comments section. Having to foreclose on a property worth a lot less than the loan value is a huge hit to banks–they’re take the loss and moving on.”

    RESPONSE: The “profits” referenced the billions made by Wall Street firms when they gave a mortgage to anyone with a pulse and then sold them as AAA investments to global investors. I wasn’t being non-sensical, you just have to learn to pay better attention to what other people write.


    3. “Canada? Take a long look in the mirror before you start casting aspersions here. You have one of the best unfunded armies of all times…just south of the border. ”

    We don’t need your protection buddy. Furthermore, don’t pretend as if you offer it to Canada out of the goodness of your paranoid hearts. First, Canada is a moat for the United States, so it is in your best interests to make sure Russia and the rest of your enemies don’t get to you through us. Nobody is pointing nukes at us, they’re all pointed at you. Second, you need to make sure our abundant oil and water doesn’t fall into the wrong hands because you’ll need them to survive.


    4. “Also, go check out what you’re doing to your own environment up there in the tar sands. It would blow your mind.”

    We’re not the ones using Chinese factories and environmental standards to crank out our goods baby. You are. You like cheap goods and you like polluting other people’s air while your Jersey Shore watching, Mall marching masses consume goods beyond their means thanks to cheap credit offered by Wall Street.

    Your dumb statement makes as much sense as saying “Tony Soprano doesn’t kill anybody”.

    CONCLUSION – You’re an elitist. You fail to acknowledge that the banks used the masses to generate massive profits and bonuses knowing full well they were creating a crisis down the road.

    You refuse to admit that banks are now foreclosing at the speed of light and with reckless disregard for the law because they need to collect as much cash as possible before the shit hits the fan.

    You would want others to believe the local bank extended Beav’s Dad a good old conventional mortgage and is being vilified for selling Beav’s house when good old Ward couldn’t make his payments.

    You fail to admit your country has been taken over by the financial elite. I choose to point it out because I want to see America succeed. I want Americans to stop being terrorized by bankers and politicians predicting the Apocalypse.

    I choose to do so because that’s what good neighbors do for each other …. eh?

    George …. The Greek …. From Canada

  60. Thor says:

    George – Thank you.

  61. tt says:

    modern amerika is a corporate fascist militaristic belligerent state.

    canada is a socialist peaceful state with much wealth in real things.

    i know who i bet on as a better place for the next 50 years. amerika will go the way of most fascist states. penury for most, trillions for a few. the idiots that think they are wealthy today, better be smart and lucky to hold on to it. fascism is insidious unless you are on the correct team.

  62. beaufou says:

    “What ‘crack’ was sold to main street? How many people were forced to take on more debt than they could handle?”

    Lol, such innocence.

  63. @Agoracom:

    If Canada doesn’t need America’s protection, it’s because nobody wants it (Canada, I mean–you guys have one of the most liberal immigration policies in the world and still have what, about two people and eight sheep per square mile?).

    Oh the horrow. Someone attested to something without a clear (if subjective) understanding. How can you even know, objectively, whether an attestation is true or not? Did the borrowers read and understand every document they signed at closing? Trust me, of course not. But they were fine with it then so they could get their hands on the Fed’s crack cocaine. Now they’re getting religion and saying everything ever attested to has to actually be properly done?

    Frankly I hope you whackos get what you want, and foreclosures are wantonly thrown out the window of a high-rise office in mid-town, along with the robo-signers and notaries and anyone else that ever had anything to do w/ the process. It will utterly destroy the residential real estate market for decades to come, which I think would ultimately be a good thing. The market, and the economy along with it, would be utterly destroyed. Gas would probably go to about $10 a gallon, but wages and employment would be declining. And if you don’t get the connection, you’ve really got no business commenting on the problems.

    Maybe then we could finally beat the crack habit of ever-cheapening dollars provided by the Fed. Which is the true source of this and everything else to do with the mortgage mess, but it’s just no fun to tar and feather our own government doing our bidding for us. The bankers wouldn’t have been dealing crack if their supplier hadn’t been giving it to them.

    There’s a good reason the Obama Administration has been mostly silent on this. They are just hoping it will blow over. They’re not so stupid that they don’t understand what yielding to populist outrage would do to our ability to finance our deficits, fiscal, trade and otherwise. If the world ever begins believing that a mortgage and note in America means anything the vox populi say it does, we’re doomed.
    But it’s good to know that people who are reasonable enough to see that the foreclosure mess as no more earth-shattering than revelations about how sausage is made are considered weasles. Count me in.

    The weasly Curmudgeon.

  64. Lugnut says:

    So if the title chains got broken at the securitization stage, that would imply that:

    A) all the similarly constructed loans not in foreclosure are also affected by potentially dubious title status , yes?


    B) theres a freight train sized load of MBS securities out there stuffed with crap paper. Whither the onslaught of lawsuits from underwater investors looking to recoup 100 cents on the dollar?

  65. Andy T says:



    Shaking head. Moving on…


  66. [...] For a primer, you can review: •  Foreclosure Fraud: “Systemic, Industrywide, Pervasive” [...]

  67. Andy T says:


    FWIW, your analogy of poor people in America with starving Ethiopian kids is one of the more elitist things I’ve ever read.

    In fact, it’s nauseating how little regard/respect you give the lower income people of the United States–how uneducated and ignorant do you think we Americans are? Your comments seem to suggest that the lower income folks here are “so dumb” that they need special instructions and care of some kind?

    I guess I give people more respect than that.

    Please reflect on your comments….they were truly sickening.

  68. AGORACOM says:


    Andy T:

    We’re obviously not on the same page. How you can confuse my message is beyond me. At least the rest of the readers understood it. Curmudgeon disagreed but at least he understood it.

    Let me summarize one more time.

    1. I am saying that elites reside on Wall Street. They figured out a scheme to stuff their pockets without any regard for their clients >> borrowers and eventual buyers of MBS.

    2. Elitists like you claim “nobody held a gun to their (borrowers) head”. It must be great to be someone like you who needs or wants for nothing.

    3. The rest of us understand that providing poor people with unlimited access to fast money, or Ethiopian kids with unlimited access to junk food is a recipe for disaster.

    4. Nobody put a gun to their head. It was worse. It was a bazooka made to look like an ice-cream cone.

    5. The people are paying for their mistakes (as they should). Wall Street has not (as it must).

    6. Your elected officials care more about re-election funds than the people they are supposed to serve when elected.

    7. Unless this problem is fixed, the US economy is doomed to collapse by either natural economic forces, or rioting citizens.

    8. I want to see the problem fixed and balance restored. You don’t even see an imbalance.

    9. I’m a capitalist. You’re an elitist

    10. If that is “sickening”, don’t forget to pass the Grey Poupon.

    George … The Greek …. From Canada … Where Everyone Gets A Shot At The Prize

  69. lawgrace says:

    Foreclosure Frauds, Wells Fargo-the Fox in Charge, and Victimization

    I believe that Wells Fargo’s announcement about refiling 55k foreclosures is because covering up wrongful foreclosures is no longer effective. Res ipsa loquitur foreclosure frauds occurring here in Louisiana involving Wells Fargo, Freddie Mac, certain foreclosure mills, and certain corrupt judges make it apparent that Wells Fargo CANNOT be trusted to fix its foreclosure wrongdoings, no more than an addict can be trusted to self-reform.

    Mortgage lenders are not required to know laws – attorneys are! Most of the time, the attorneys made severe errors – sometimes intentionally, since errors help keep the billable tab going, and commit the very frauds that provide basis, defenses, and reasons to attempt negotiating mortgage contracts.

    Compare: blighted neighborhoods and foreclosure deed conveyances to non-existent mortgage lenders; bankruptcy “Lift Stay” motions that “lack standing,” and names on “proof of claims” different from ‘lift stays’ “movers”; and illegal property deeds.

    Also, foreclosure lawyers have failed to “effect service,” failed at various substantive Civil Procedure requirements which make it not lawful to proceed with that lawyer’s case until those errors are corrected. As such, homeowners are not to be blamed for refusing to cooperate with erroneous and fraudulent confiscation of their homes!

    Often, foreclosure delays are because of the lawyers, but the lawyers keep that fact from clients. It is usually always foreclosure lawyers’ serious mistakes, errors, and frauds that supply reasons, defenses, and basis for anyone with a brain / anyone who prefers to not be homeless to attempt renegotiating his or her mortgage contract.

    Also, property owners seeking debt reorganization through Chapter 13 Bankruptcy are not to be blamed for contesting a false “proof of claim” or false “Lift Stay” motion. As such, countless foreclosure lawyers owe a lot of money to their clients for fatally botching foreclosure cases.

    Scoffer spew anger about others living ‘rent free’ have absurd responses about ‘White Collar foreclosure fraud’ – which includes confiscating distressed properties via falsified court bankruptcy and state court pleadings.

    Samples of Wells Fargo, Freddie Mac, Lehman Brothers foreclosure debt collector attorneys (foreclosure mills), and judicial corruption are posted on my website. Like the matter of the “Bailey” property foreclosure filed under Lehman Brothers, but the Hurricane Katrina insurance money was demanded by Wells Fargo. Also, posted is how Wells Fargo (WF) filed a false IRS form 1099-A despite that Wells Fargo did not foreclose. http://newsblaze.com/story/20101028181052lawg.nb/topstory.html

  70. [...] Foreclosure Fraud: “Systemic, Industrywide, Pervasive” (October 16th, 2010) [...]