My Sunday Washington Post Business Section column is out. This morning, we look at the yet another bank giveaway, the awful robosigning foreclosure settlement.

The print version had the headline The robosigning deal is a useless embarrassment,  while the online version is titled Foreclosure settlement a failure of law, a triumph for bank attorneys.

As I noted oh so many times before, once we bailed out failing banks, there is a strong incentive to protect rather than police them. This deal is a perfect example.

Here’s an excerpt from the column:

“Before the settlement, we learned that nearly every aspect of the robosigned documents was false. None of the details were ever reviewed. The signatures attesting to the review of the documents were fabricated — made by someone other than the person whose name was on the document. Neither person — the supposed signatory to the document nor the hired forger — ever validated the facts of each case. All of the safeguards put in place to make sure foreclosures were done correctly and legally were bypassed. Even the notary stamps were bogus — they were not real, and not signed by a notary to validate that the signer and the signature matched.

How did this happen? Instead of a careful review, people were hired to rubber-stamp hundreds of foreclosure documents an hour. Former burger flippers were paid $8 to $10 an hour to violate the law, file false affidavits and commit perjury. Some of the information was correct, but much of it was wrong — and none of it was verified for court purposes.

And now we have this grand settlement.

What will the impact be?

Economically, it will have no effect. The dollar amount is small relative to the U.S. economy. Indeed, the total impact of the settlement is less than one ten-thousandth of annual gross domestic product.

Then there’s the “math.” The number touted is $26 billion, but that’s wildly misleading. At most, it’s $6 billion, paid out by a consortium of banks. The other $20 billion is for capital write-downs for delinquent homeowners that were going to happen anyway. These were homes that the banks anticipated taking a $50 billion-to-$100 billion hit on. Only now, they get a tax benefit for it.”


The dead tree version of the paper has a nice layout:
click for ginormous version of print edition



Foreclosure settlement a failure of law, a triumph for bank attorneys
Barry Ritholtz
Washington Post, February 26 2012

RoboSign Washington Post, February 26 2012 (PDF)

Category: Apprenticed Investor, Legal, Real Estate, Really, really bad calls

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.

28 Responses to “The Robosigning Deal is a Useless Embarrassment”

  1. Jim67545 says:

    You mention that, thanks to robosigning, erroneous foreclosures have occurred “repeatedly.” The word “repeatedly” suggests that these are occurring one after another but does not give a sense of how many of these situations have occurred over time. Do you have those statistics?


    BR: There is no source for that info — however, we have lots of specific reports about this see: Legal ‘Impossibilities’ & Foreclosure Errors from October 2010.

    Since then, more examples have been documented.

  2. not-affiliated-with-Wall Street says:

    Our New York Attorney General, who received praise here, sold out completely. Didn’t he?

    Also, “burgers flippers, who are derided here, earned their $10 honestly, or did until they entered the world of finance.


    BR: Jury still out on NYAG — he insisted (and got) no immunity or future criminal indictments.

    Let’s see what he does with that.

  3. MayorQuimby says:

    Yes he did, nawws.

    Good article.

    System is broken.

    Hopefully we rectify the problems instead of starting something that is even more flawed and doomed to fail (ie gold backed money).

    All we need to do is this:

    1. Back all “lending” with capital. No more 5:10, 10:1, or 20:1 leverage.

    2. Mandatory mark to market. Break up anything insolvent.

    3. Use fed money to capitalize new banks and lend.

    4. NO MORE DEFICITS. Attempting to keep aggregate demand growing to infinity (literally) with debt (all of which is supported by the people who have reached eur max credit load, consumers) is amongst the dumbest things ever attempted by man. You might as well try and fly by flapping your arms.

    5. Get money out of gvmt. Running for office means no insider trading for you or staff, no private sector job, of so then you lose your gvmt pensions and benefits. Oh and all gvmt pay increases must be directly approved by the people. Term limits. One and done.

    Okay…maybe another dozen or so but you get the idea…

  4. jeznadel says:

    Human signature is still more appropriate that robosigning. A human still have the ability and analyze the content of the documents before accept it. Human still have sense of emotion how to deal with some situation robo is is just a machine or programming software that listen to the comment only with some parameters to follow to perform the duty.

  5. janchup says:

    It’s small thing but at least Obama isn’t bragging about this anymore. I honestly can’t tell if he’s incompetent or simply easy for highly vested interests to drag along by the nose.

  6. Sechel says:

    Very good article. While one can arguably debate the proper scope and role of gov’t, “rule of law” is not open to debate. When gov’t fails to enforce the rule of law or does so arbitarily it forfeits the legitimacy of its existence.

  7. “…When gov’t fails to enforce the rule of law or does so arbitrarily it forfeits the legitimacy of its existence…”

    “…forfeits the legitimacy of its existence…”


  8. bdw says:

    Great piece Barry. When the balance of power between consumers and larger financial institutions is so out of scope, only the government as a representative of those who consent to it has the ability and power to respond. Do you think the settlement amounts to pre-emptive “bail,” which as you’ve mentioned means that breaking the law merely becomes the cost of doing business?

  9. louis says:

    Force the holders to the barber shop, hit the reset button and call it a day.

    United States of Argentina. Next Credit fueled bubble please.

  10. RW says:

    Good article: Clear in both fact and outrage.

    It just seems as if law enforcement is following regulators down the rabbit hole: What we cannot (or will not) prosecute shall be forgiven.

    Okay there is a little wrist slap in this settlement but it is otherwise so intensely existential in its absurdity that Camus becomes the logical authority:

    “How many crimes are permitted simply because their authors could not endure being wrong.”

    “Absolute virtue is impossible and the republic of forgiveness leads, with implacable logic, to the republic of the guillotine.”

    But we’ll still give the final word to Louis D. Brandeis just to be “fair and balanced”

    “Crime is contageous. …If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.”

    Justice Brandeis might have considered it the same thing but it also invites vigilantism.

    French toast and country bacon for breakfast; time to think of other things. A votre sante.

  11. hammerandtong2001 says:

    Statistics? Here are some stats, though I read these to address the front end of residential property purchases (versus the back-end when after purchase, default occurs and foreclosure process begins).

    The good offices of Registry of Deeds in Southern Essex County, Massachusetts conducted a forensic audit of the mortgages filed in their geographical purview (this area includes Salem, MA for reference).

    Here are the depressing highlights – and I read these to be harnringers of foreclosures which would follow:


    At the Annual Conference of The International Association of Clerks, Recorders, Election Officials and Treasurers (IACREOT), Register John O’Brien revealed the results of an independent audit of his registry. The audit, which is released as a legal affidavit was performed by McDonnell Property Analytics, examined assignments of mortgage recorded in the Essex Southern District Registry of Deeds issued to and from JPMorgan Chase Bank, Wells Fargo Bank, and Bank of America during 2010. In total, 565 assignments related to 473 unique mortgages were analyzed.

    McDonnell’s Report includes the following key findings:
    • Only 16% of assignments of mortgage are valid
    • 75% of assignments of mortgage are invalid.
    • 9% of assignments of mortgage are questionable
    • 27% of the invalid assignments are fraudulent, 35% are “robo-signed” and 10% violate the Massachusetts Mortgage Fraud Statute.
    • The identity of financial institutions that are current owners of the mortgages could only be determined for 287 out of 473 (60%)
    • There are 683 missing assignments for the 287 traced mortgages, representing approximately $180,000 in lost recording fees per 1,000 mortgages whose current ownership can be traced.

    McDonnell told O’Brien… “What this means is that the degradation in standards of commerce by which the banks originated, sold and securitized these mortgages are so fatally flawed that the institutions, including many pension funds, that purchased these mortgages don’t actually own them because the assignments of mortgage were never prepared, executed and delivered to them in the normal course of business at the time of the transaction. In a blatant attempt to engineer a ‘fix’ to the problem, the banks set up in-house document execution teams, or outsourced the preparation of their assignments to third parties who manufactured them out of thin air without researching who really owns the mortgage.”

    Naked Capitalism has more here:



  12. James Cameron says:

    You’ve highlighted one of the most egregious aspects of the settlement right here:

    “Thus, the robosigning agreement has allowed the mass production of perjury. It has gone unrecognized and unpunished. It has made perjury a business expense, like travel or office furniture. The same reckless approach to giving loans to unqualified people was institutionalized, leading to another reckless approach to foreclosing homes.

    “We still don’t know who ordered these crimes, who is responsible for this, whether they still are in their jobs — or whether they are in a position of authority to do the same thing again.”

    Our justice system regularly prosecutes and puts people away for far lesser crimes.

    Great piece.

  13. trimac says:

    Terrific article. It is great to see your ideas and commentary in the Washington Post. Keep up the good work!

    Unless the government holds Wall Street accountable, people will continue to take to the streets.

  14. Stan Klein says:

    I’m not sure I agree with your column. It all depends on whether the AG’s continue to investigate the criminality involved and we begin to see bank executives and their lawyers doing “perp walks” as the indictments begin to flow. There are also the lawsuits against MERS, which I think need to become national in scope. If the banks are required to shut down MERS and fix all the mess in title and mortgage recordations, it could cost billions to straighten things out.

    Also, there should be a huge class-action lawsuit (still allowed under the settlement) covering anyone who lost their home without having a mortgage, was an active duty service member, or other craziness, and the remedy should be for the banks — and the executives who ordered up the situations — to make them whole and compensate them for their troubles. That means putting them back into equivalent homes and paying for the consequences of their home losses. It also means that the executives’ bonus money and other wealth should be tapped as part of the compensation.

    If this results in the bankruptcy of the banks, then because of the fraud and criminality, the aggrieved homeowners should be first in line to become the new owners of the banks.

  15. GeorgeBurnsWasRight says:

    I’m unlikely to buy a home, but if I do I would be VERY concerned about buying an existing home and later having some attorney claim my title isn’t valid.

    There have been innumerable cases of innocent parties being forced to pay the price for a prior party’s errors. For example, following trucking deregulation several companies stopped filing rate changes and then went out of business. Smart attorneys bought up the rights to their customers and then began billing customers for the last rate filled with the ICC. The case went to the Supreme Court who ruled that the lower rates charged and paid in good faith by the customers were invalid, and they owed rates they had never been quoted, much less agreed to pay.

  16. bear_in_mind says:

    @StanKlein: Wake up and smell the coffee. They’ve had years to prosecute and done absolutely diddly-squat. This is a political SETTLEMENT to make the howls of protest go away. Tell you what: prove me wrong. Show me five senior executives from the major financial instiutuons in prison before the statute of limitations run out and I’ll spend a day wearing a chicken suit in front of your office. You know and I know that’s got a snowball’s chance in hell of happening, but dream the dream.

    @Barry: Fantastic! Thanks for putting these thoughts to paper. It tells the story far better than any summation found in MSM outlets. American citizens have been raped; and continue to get screwed yet are blissfully unaware that core sections of our legal system have been rendered null and void by the dint of BIG MONEY interests. “One person, one voice, one vote.” Wow, does that seem utterly quaint now.

    Not sure where this all leads, but let’s all at least be honest enough to admit what has transpired, and the implications for our collective liberty.

  17. bear_in_mind says:

    So much for “America the Free” and “Land of Liberty.” This whole damned thing makes my blood boil! Anyone have a list of who stole our country and where are those punks hiding?

  18. Jim67545 says:

    BR. I DID read the Oct 2010 discussion you posted as your source – all 109 postings. The sum total, after deleting repeats and unrelated situations, was 5 or 6 situations where the wrong property was foreclosed upon or where the foreclosure occurred for no reason and these were spread across a couple years. This despite your begging, several times, for actual examples.

    God knows there are lots of aspects of bank origination and servicing that warrant harsh prosecution. However, your assertion that wrongful foreclosure was occurring “repeatedly” is thusfar unproven, unless you mean by “repeatedly” that single instances are occurring with a frequency of perhaps one every six months within a situation in which millions of properties are being foreclosed. And, the lack of evidence that this was anything more than very isolated instances was noted by several knowledgable posters in that 2010 discussion.

  19. Northeaster says:

    “You mention that, thanks to robosigning, erroneous foreclosures have occurred “repeatedly.” The word “repeatedly” suggests that these are occurring one after another but does not give a sense of how many of these situations have occurred over time. Do you have those statistics?” -

    At the Massachusetts Southern Essex Registry of Deeds we have over thirty-one thousand “robo-signed documents. The Registrar, John O’Brien set up a database for resident to check to see if there are issues. So over 31k, in just one county, no problem, CONgress and State Attorney Generals are making it all go away (but not really, someone pays, guess who?).

  20. Great piece Barry. Very clear take on a complicated topic.

  21. Jim67545 says:

    To Northeaster:
    Let’s try to keep the issues clear. We are talking about homeowners who are unjustly evicted, because the wrong property was identified, they were a soldier serving overseas, they were in fact not delinquent, etc. If you follow BR’s link you will find 109 posts which, in total, relate perhaps a half dozen instances of unjust eviction. That is what I am addressing – much to do about nothing.

    I don’t doubt that there are documentary defects and errors to be found in foreclosures in general. Your statistics suggest that these problems number in the tens, if not hundreds of thousands. I don’t disagree. However, defective documentation that plays a part in the foreclosure and eviction of a homeowner who is seriously delinquent, who has been properly identified and given the proper notices, is a different matter.

  22. [...] The $26b (actually only $6b) Mortgage Settlement: A Useless Embarrassment (WaPo by Ritholtz) [...]

  23. [...] you want to gain perspective on the settlement deal, then you must read his blog post and his column. [...]

  24. [...] Barry Ritholtz of The Big Picture Blog, lays out the $26B mortgage fraud – robo-signing settlement with Bloomberg Law’s Lee Pacchia in a context that we can all understand. Barry authored a much talked about column last weekend in the Washington Post. [...]

  25. victor says:

    Good article, a lone voice drowned in the cacophony from those who profited and now display bragging rights claiming that fairness has prevailed.

    @MayorQuimby: OK but that would mean no more fat bonuses for the WS big cats and no more boondoggles for our elected rep’s. Don’t you think that’s a bit cruel? Breaking all those cozy arrangements they had worked so hard for? Why not just a (mild) slap on the hand and let it go, please? But wait, that just happened.