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FT Alphaville gives us the Cliff note version of the national mortgage fraud bank settlement — available in easy to follow graphic or text form:

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Here is the breakdown:

Under the agreement, the five servicers have agreed to a $25 billion penalty under a joint state-national settlement structure.

Nationally:

• Servicers commit a minimum of $17 billion directly to borrowers through a series of national homeowner relief effort options, including principal reduction. Servicers will likely provide up to an estimated $32 billion in direct homeowner relief.

• Servicers commit $3 billion to an underwater mortgage refinancing program.

• Servicers pay $5 billion to the states and federal government ($4.25 billion to the states and $750 million to the federal government).

• Homeowners receive comprehensive new protections from new mortgage loan servicing and foreclosure standards.

• An independent monitor will ensure mortgage servicer compliance.

• States can pursue civil claims outside of the agreement including securitization claims as well as criminal cases.

• Borrowers and investors can pursue individual, institutional or class action cases regardless of agreement.

A major foreclosure services company is indicted for “robo-signing,” even as a multibillion-dollar deal to provide relief to struggling homeowners offers limited legal protection for financial firms.

Buying foreclosures to turn them into rental properties is tricky business. Mack Companies, a Chicago real-estate firm, invests in about one out of every 40 homes it inspects. MarketWatch’s Amy Hoak looks at why some make the cut and others don’t.

Feb. 3, 2012

A modern Pecora Commission could right Wall Street wrongs
Barry Ritholtz
January 28 2012

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What shall we make of this surprise pronouncement in President Obama’s State of the Union address? A belated investigation has been launched into the role of fraud in the financial crisis.

This much is clear: Despite rampant illegalities, bank fraud and countless cases of perjury, the response to date — at the federal level and from most, but not all, states — has been underwhelming, cowardly even. A few principled holdouts — the attorneys general of Delaware, New York, Nevada and California — refuse to rubber-stamp a pre-investigation settlement with banks, but that’s all. Despite chances to bring crooks to justice, there has been little action.

So, here we are, four years after the great financial collapse, three years after the recovery began and in the last year of Obama’s term — and the president has finally decided to investigate the role of fraud in the great global financial crisis. Hence, this new task force — the unit of Mortgage Origination and Securitization Abuses — begins behind the curve. The statute of limitations is, in many cases, close to elapsing.

Even so, do not dismiss the investigation out of hand because of the timing: History informs us that a serious investigation can begin four years after the fact. Recall that Ferdinand Pecora was the fourth chief counsel for the Senate committee that investigated the Wall Street crash of 1929 and subsequent Depression. He was appointed in 1932 and received broad investigatory powers in 1933. His report ran thousands of pages. Thanks in large part to Pecora’s findings, Congress passed the Glass-Steagall Banking Act, which separated commercial and investment banking; the Securities Act of 1933, which established penalties for filing false information about stock offerings; and the Securities Exchange Act, which created the Securities and Exchange Commission to regulate the stock exchanges. Nearly 50 years of financial stability followed.

The personality in charge can make all the difference. In an encouraging sign, Obama appointed to the task force New York Attorney General Eric Schneiderman, one of the few attorneys general not railroaded into a premature settlement with banks of the robo-signing-foreclosure scandal.

Critics have derided the task force as little more than election maneuvering. The politics are obvious: Both Occupy Wall Street and the tea party were very unhappy with the bank bailouts; they seem even less happy with the lack of prosecution.

It’s fair to ask: Is this new task force a meaningless exercise?

It is too soon to tell, of course. Like good poker players, we can look for “tells” that signal whether this will be a farce or a serious player. We’ll find clues in the structural setup of the office as well as the areas it investigates.

In the setup of the office, four aspects are crucial:

• Does the office have subpoena power (as the New York attorney general’s office has through the Martin Act)?

• Are there going to be public hearings (preferably in the Senate)?

• Will the commission have a significant budget?

• Will it be a forum for whistleblowers and crowdsourcing?

Without such powers, the office would be a farce, helping to shield banks from the fallout of their wrongdoings.

What the office investigates will also reveal how serious this is. Both pre- and post-crisis topics should be investigated, including:

• MERS: Mortgage Electronic Registration Systems was created by banks without any authority or enabling legislation. It allowed the rapid transfer of mortgages, avoiding state and county filing fees amounting to billions of dollars. Without MERS, it’s hard to imagine that the massive volume of mortgage securitizations could have occurred. How were lenders able to circumvent mortgage filings with town and county registrars? Did they engage in illegalities? How many billions of dollars do they owe in fees for transferred notes? And what percentage of MERS assignments were fraudulent, made for entities that did not exist?

• Origination fraud: Why did lenders accept “stated income” loans? Why did they abandon traditional standards? Michael White, a Countrywide subprime unit employee, called this “origination fraud,” observing, “Eliminate the verification of income for a mortgage borrower, and you eliminate your ability to predict the likelihood of repayment or default.”

• RMBS: Wall Street’s securitized mortgage pools (residential mortgage-backed securities) contained a broad variety of flaws, some so egregious that they amounted to fraud. In plain English, we’re talking about bad paperwork and misrepresented pools of mortgages to borrowers whose debts were significantly understated and whose median incomes and credit scores were significantly overstated.

• Insurance fraud: Look at a bank tactic in which legitimate home insurance is canceled and new insurance provided at a substantially higher fee through a subsidiary or affiliate of the bank mortgage holder. This extra expense in some cases led to foreclosures.

• “Pyramid” servicing fees: An illegal practice in which current payments are applied to past late fees, generating more late fees and additional interest owed and creating a delinquency where none existed. This tactic also led to foreclosures that were probably unlawful.

• Lost mortgage notes: How is it possible that the most important part of the mortgage contract — the promissory note — was consistently lost or misplaced by banks? It is unfathomable to anyone who has ever handled documents. At best, it’s gross incompetence. At worst, it’s willful document destruction during litigation.

•Document fraud for sale: There were many examples of alleged document fraud, but the one crying out for investigation involves Lender Processing Services’ DOCX subsidiary. The firm seems to have been selling fabricated documents for a fee to lawyers and banks. Indeed, Lender Processing Services, which processes nearly half of all U.S. foreclosures, could require a separate investigation.

•False affidavits, perjury (robo-signing): We do not know who ordered the robo-signing of foreclosure documents, the false notarizations, fraudulent written statements to courts and perjury. This should be easy to investigate, like flipping a nickel-bag dealer to get to the drug kingpin. Astoundingly, this easy-to-investigate felony (via notarized perjurious statements submitted to foreclosure courts) has yet to be prosecuted.

• Foreclosure mills, process servers: Law firms engaged in rampant fraud that corrupted the foreclosure process. If found guilty, those folks should be disbarred and jailed. Same for the “sewer service” process servers who threw away legally required notices to delinquent homeowners.

• Soldiers and Sailors Relief Act: Federal law protects active-duty service members from foreclosure and eviction. I find violation of this law reprehensible. If it were up to me, I would let the Special Forces — Navy Seals and Army Green Berets — handle this as they see fit.

Even with criminal statutes of limitations elapsing, we can achieve some measure of justice against the crisis wrongdoers. Lawyers can be disbarred and corporate insiders banned from serving in publicly held firms again. CEOs and CFOs can be fired. A significant investigation, with subpoena powers, a real budget and public hearings would go a long way toward restoring public confidence.

Schneiderman has an opportunity to create a legacy for himself that lasts far beyond the next election cycle. If he lacks the tools to do so, he should demand them or resign in protest.

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Ritholtz is chief executive of FusionIQ, a quantitative research firm. He is the author of “Bailout Nation” and runs a finance blog, the Big Picture.

A.G. SCHNEIDERMAN ANNOUNCES MAJOR LAWSUIT AGAINST NATION’S LARGEST BANKS FOR DECEPTIVE & FRAUDULENT USE OF ELECTRONIC MORTGAGE REGISTRY

Complaint Charges Use Of MERS By Bank Of America, J.P. Morgan Chase, And Wells Fargo Resulted In Fraudulent Foreclosure Filings

Servicers And MERS Filed Improper Foreclosure Actions Where Authority To Sue Was Questionable

Schneiderman: MERS And Servicers Engaged In Deceptive and Fraudulent Practices That Harmed Homeowners And Undermined Judicial Foreclosure Process

NEW YORK – Attorney General Eric T. Schneiderman today filed a lawsuit against several of the nation’s largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as “MERS certifying officers,” have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America, N.A., Wells Fargo Bank, N.A., as well as Virginia-based MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc.

The lawsuit further asserts that the MERS System has effectively eliminated homeowners’ and the public’s ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database – which is plagued with inaccuracies and errors – over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

“The banks created the MERS system as an end-run around the property recording system, to facilitate the rapid securitization and sale of mortgages. Once the mortgages went sour, these same banks brought foreclosure proceedings en masse based on deceptive and fraudulent court submissions, seeking to take homes away from people with little regard for basic legal requirements or the rule of law,” said Attorney General Schneiderman. “Our action demonstrates that there is one set of rules for all – no matter how big or powerful the institution may be – and that those rules will be enforced vigorously. Only through real accountability for the illegal and deceptive conduct in the foreclosure crisis will there be justice for New York’s homeowners.”

The financial industry created MERS in 1995 to allow financial institutions to evade local county recording fees, avoid the hassle and paperwork of publicly recording mortgage transfers, and facilitate the rapid sale and securitization of mortgages. MERS operates as a membership organization, and most large companies that participate in the mortgage industry – by originating loans, buying or investing in loans, or servicing loans – are members, including JPMorgan Chase, Bank of America, Wells Fargo, Fannie Mae, and Freddie Mac. Over 70 million loans nationally have been registered in MERS System, including about 30 million currently active loans.

Through their membership in MERS, these companies avoided publicly recording the purchase and sale of mortgages by designating MERS Inc. – a shell company with no economic interest in any mortgage loan – as the “nominal” mortgagee of the loan in the public records. Instead, MERS members were supposed to log mortgage transfers in the MERS private electronic registry. The basic theory behind MERS is that, because MERS Inc. serves as a “nominee” (or agent) for most major lenders, it remains the “mortgagee” in the public records regardless of how often the loan is sold or transferred among MERS members. Thus, although MERSCORP has only about 70 employees, MERS Inc. serves as the mortgagee of record for tens of millions of loans registered in the MERS System.

MERS has granted over 20,000 “certifying officers” the authority to act on its behalf, including the authority to assign mortgages, to execute paperwork necessary to foreclose, and to submit filings on behalf of MERS in bankruptcy proceedings. These certifying officers are not MERS employees, but instead are employed by MERS members, including JPMorgan Chase, Bank of America, and Wells Fargo.

MERS’ conduct, as well as the servicers’ use of the MERS System, has resulted in the filing of improper New York foreclosure proceedings, undermined the integrity of the judicial process, created confusion and uncertainty concerning property ownership interests, and potentially clouded titles on properties throughout the State of New York. In fact, several New York judges have questioned the standing of the foreclosing party in cases involving MERS loans and the validity of mortgage assignments executed by MERS certifying officers.

The lawsuit specifically charges that the defendants have engaged in the following fraudulent and deceptive practices:
• MERS has filed over 13,000 foreclosure actions against New York homeowners listing itself as the plaintiff, but in many instances, MERS lacked the legal authority to foreclose and did not own or hold the promissory note, despite saying otherwise in court submissions.
• MERS certifying officers, including employees and agents of JPMorgan Chase, Bank of America, and Wells Fargo, have repeatedly executed and submitted in court legal documents purporting to assign the mortgage and/or note to the foreclosing party. These documents contain numerous defects, including affirmative misrepresentations of fact, which render them false, deceptive, and/or invalid. These assignments were often automatically generated and “robosigned” by individuals who did not review the underlying property ownership records, confirm the documents’ accuracy, or even read the documents. These false and defective assignments often masked gaps in the chain of title and the foreclosing party’s inability to establish its authority to foreclose, and as a result have misled homeowners and the courts.
• MERS’ indiscriminate use of non-employee “certifying officers” to execute vital legal documents has confused, misled, and deceived homeowners and the courts and made it difficult to ascertain whether a party actually has the right to foreclose. MERS certifying officers have regularly executed and submitted in court mortgage assignments and other legal documents on behalf of MERS without disclosing that they are not MERS employees, but instead are employed by other entities, such as the mortgage servicer filing the case or its counsel. The signature line just indicates that the individual is an “Assistant Secretary,” “Vice President,” or other officer of MERS. Indeed, these documents often purport to assign the mortgage to the certifying officer’s own employer. Moreover, as a result of the defendants’ failure to track the designation of certifying officers and the scope of their authority to act, individuals have executed legal documents on behalf of MERS, such as mortgage assignments and loan modifications, when they were either not designated as a MERS certifying officer at the time or were not authorized to execute documents on behalf of MERS with respect to the subject loan.

• MERS and its members have deceived and misled borrowers about the importance and ramifications of MERS’ role with respect to their loan by providing inadequate disclosures.

• The MERS System is riddled with inaccuracies which make it difficult to verify the chain of title for a loan or the current note-holder, and creates confusion among stakeholders who rely on the information. In addition, as a result of these inaccuracies, MERS has filed mortgage satisfactions against the wrong property.

The lawsuit seeks a declaration that the alleged practices violate the law, as well as injunctive relief, damages for harmed homeowners, and civil penalties. The lawsuit also seeks a court order requiring defendants to take all actions necessary to cure any title defects and clear any improper liens resulting from their fraudulent and deceptive acts and practices.

The matter is being handled by Deputy Bureau Chief of the Bureau of Consumer Frauds & Protection Jeffrey K. Powell, Assistant Attorney General Clare Norins, and Assistant Solicitor General Steven C. Wu, under the supervision of First Deputy Attorney General Harlan Levy.

The most interesting news from the SOTU address was the very belated appointment of a mortgage investigation task force, the Office 0f Mortgage Origination and Securitization Abuses.

You may recall that back in April of 2011, I presented to the National Association of Attorneys General a short keynote speech. It was titled “How Systemic Bank Fraud Contributed to the Financial Crisis.”In particular, you should review pages 14-17, and 22-30.

But meanwhile you may be asking why in 2012 — 4 years after the great financial collapse, 3 years after the recovery began, and in the last year of the President’s term — Mr. Obama finally decided to investigate the role of Fraud in the entire crisis.

The politics are obvious: Both Occupy Wall Street and the Tea Party were very unhappy with the bailouts, and even more unhappy with the lack of prosecutions. So its obviously good politics.

But the suspicions on the Left have already begun; consider:

• The Schneiderman Gambit: Financial Fraud Unit Appears Designed to Fail, and Grease Skids for Foreclosure Fraud Settlement (Firedoglake)

• Obama To Announce Mortgage Crisis Unit Chaired By New York Attorney General Schneiderman (HuffPo)

• Is Schneiderman Selling Out? Joins Federal Committee That Looks Designed to Undermine AGs Against Mortgage Settlement Deal (naked capitalism)

• California calls $25-billion mortgage settlement ‘inadequate’ (L.A. Times)

That is way too negative — but the suspicions of the Obama administration, and Treasury Secretary Tim Geithner aka the Banker’s friend — is not unwarranted.

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What is the thought process about this? Is this the real deal investigation? Will this commission uncover anything, or is this cover for a white wash?

What say ye?

Mitt Romney’s State of the Union Challenge on the Mortgage Crisis
by Eliot Spitzer and Dylan Ratigan

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Finally, a presidential candidate came out and honestly addressed the biggest problem in our economy, the enormous debt overhang in our mortgage market. A few days ago, Mitt Romney was at a forum in Florida talking about foreclosures, and his comments were actually refreshingly honest about our housing and banking situation and the need for a debt write-down.

We’re just so overleveraged, so much debt in our society, and some of the institutions that hold it aren’t willing to write it off and say they made a mistake, they loaned too much, we’re overextended, write those down and start over. They keep on trying to harangue and pretend what they have on their books is still what it’s worth.

Mitt Romney was pointing out that the banks are carrying debt on their books at inflated values. When was the last serious politician to make that point, openly? There’s more.

In some cases, if the debt is not in something you can service, it’s like you have to move on and start over away from those debts. It’s helpful if you get an institution that’s willing to work with you, but if you don’t you have no other option.

Romney is now saying that if you can’t pay your debts and your lending institution won’t work with you, walk away. Perhaps this isn’t so surprising, though, as Romney is an expert in debt restructuring. This is actually just common business sense.

And finally, he offered a real solution to the mortgage debt crisis.

The banks are scared to death, of course, because they think they’re going to go out of business… They’re afraid that if they write all these loans off, they’re going to go broke. And so they’re feeling the same thing you’re feeling. They just want to pretend all of this is going to get paid someday so they don’t have to write it off and potentially go out of business themselves.”
This is cascading throughout our system and in some respects government is trying to just hold things in place, hoping things get better… My own view is you recognize the distress, you take the loss and let people reset. Let people start over again, let the banks start over again. Those that are prudent will be able to restart, those that aren’t will go out of business. This effort to try and exact the burden of their mistakes on homeowners and commercial property owners, I think, is a mistake.

This is the right approach to the problem. If you force the banks to recognize losses on the mortgage debt they are holding, then all of a sudden they will have an incentive to write down debt. Otherwise, a bank will do anything it can to maintain the fiction that the debt is worth 100 cents on the dollar, including lie, harass, and robo-sign.

There are ample reasons for cynicism, the cup overfloweth with them, perhaps. Still, what’s shocking about these comments is how casual they are, as if it’s common knowledge that the banking system is still insolvent and that our debt loan cannot be paid back. Among financial elites, it in fact is common knowledge. Tim Geithner noted this when he talked about Lehman Brothers and the “air in marks” on the debt it was holding on its books. And Martin Feldstein on the Republican side and Alan Blinder on the Democratic side are both arguing for debt write-downs. Everyone knows this has to happen, that the accounting manipulation needs to stop. But Mitt Romney actually said it.

We’re pretty sure that Romney will walk these comments back if necessary, since he holds positions only insofar as they are convenient. Since at that same forum he called out for praise one of the most bank-friendly state officials in the country, Florida Attorney General Pam Bondi, we can probably measure his adherence to this common-sense approach in micro-seconds.

But what this episode shows is that the solutions to our crisis are understood. In the book Greedy Bastards, the question of restructuring debt is considered in detail. We need a debt deal, as Romney inadvertently noted. More fundamentally, getting rid of the accounting gamesmanship will lead to a healthier economy because it will align financial assets with real economic assets. As another example, credit default swaps are linking American banks excessively to an unstable Eurozone. Credit default swaps are in fact yet another accounting game designed to further balance sheet fictions. Dick Grasso offered his solution to this obvious problem. We can, according to Grasso, simply declare these contracts online gaming, and void them.

What Americans should be taking from this episode is that finance, while complex, is not conceptually hard. If it’s a lie on the balance sheet, it’s going to be destructive to ordinary people. If you stop the balance sheet lying, the economy will do better. But while Mitt Romney might have said this out loud, they all know it behind closed doors. Our question is, who will be the first to make this a policy reality?

Earlier this week, we discussed whether Lender Processing Services deserved the “Corporate Death Penalty“.  You can see all of our prior LPS discussions are here.

I bring this up because there is a fascinating post over at Reality Check, which declares Florida’s new AG Pam Bondi “the BFF of foreclosure fraudsters” such as LPS. (I will have more on Bondi later this week).

It is well worth your time to plow through this full discussion, including the links.

If it gets too depressing, then simply shift your reading to any of Miami Herald columnist Carl Hiaasen’s hilarious novels. If you want to learn what a swamp of corruption Florida is, how the nexus between RE developers and political hacks has helped create a fetid atmosphere of influence peddling — and have a good chuckle in the process — than he is your man.

Best of all, you can pretend that these novels are all fiction.

Unless you are a homeowner in Florida, who has been defrauded by corrupt law firms and document fraud, living in a state where the AG in the pocket of the Fraudsters. Then you are pretty much fucked.

Governor Sarah Bloom Raskin
At the Association of American Law Schools Annual Meeting, Washington, D.C.
January 7, 2012

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Thank you and happy New Year. It is a pleasure to be with you today as you meet to discuss so many pressing and important issues. I know there has been much discussion at this conference about the public function of law schools and I commend you for tackling this essential challenge. In my speech today, I hope to add to the conversation a little bit by presenting a simple argument, that laws and regulations must be enforced, and enforcement must be part of what we teach lawyers and future lawmakers to study. What we think of as the rule of law encompasses not merely theories of the process by which public laws and regulations are created through particular legislative and administrative procedures, and not merely theories of how laws and regulations are interpreted by courts. The rule of law includes enforcement itself. The rule of law compels us to consider whether a rule has been crafted in such a way that it is capable of being complied with and capable of being enforced effectively by state actors. The rule of law also involves decisions about whether there has been compliance, and if not, what should be done about it.

The failure of timely enforcement leads to the entrenchment of bad practices and an increase in the costs of correction. For example, turning to what will be the focus of my comments today–the role of mortgage servicers in the foreclosure crisis–the longer it takes for mortgage servicers to make the operational adjustments necessary to fix their sloppy and deceptive practices, the costlier and more difficult it becomes for them to sort them out and correct them.

More fundamentally, a failure by regulators to enforce the laws and regulations as strong antidotes to financial misconduct and unsafe and unsound practices by the institutions they regulate establishes de facto acquiescence to the dominant norms of the financial marketplace. At that point, our laws become the resting place for unfair practices and broad disrespect for the law generally. This is a phenomenon that Shakespeare’s Angelo observed in “Measure for Measure” when he said:

We must not make a scarecrow of the law,
Setting it up to fear the birds of prey,
And let it keep one shape, till custom make it
Their perch and not their terror.

For sure, different regulatory regimes could have different answers regarding the best way to enforce laws and regulations. As law professors teaching both the substance of law and the practice of law, I imagine you find ways within your courses and scholarship to discuss theories of enforcement–for example, the use of private rights of action versus enforcement by regulatory agencies; different enforcement tools such as memoranda of understanding, consent orders, and cease and desist agreements; how these different enforcement tools are sequenced; and whether and when violations of law should be publicized.

In answering all of these questions, there is consensus that public enforcement should be used in addressing pervasive regulatory problems. Today I want to talk about how home mortgage foreclosures hurt the pace of an economic recovery, and how important it is that the severe misconduct that has been uncovered in the mortgage servicing sector be addressed through intensified public enforcement of the law as part of the overarching effort to rebuild our damaged communities and neighborhoods.

Mortgage Servicing and the Economy
The economic downturn that began in late 2007 and worsened considerably in the autumn of that year resulted in the worst recession in many decades. Although recovery from the recession officially began in the third quarter of 2009, the pace of recovery has been modest, resulting in an unemployment rate that has remained at or above 8.5 percent since mid-2009. This sustained high unemployment rate–with all the attendant social consequences, including lost income and family strains–has contributed to an unprecedented number of mortgage foreclosures throughout the nation.

This wave of foreclosures is one of the factors hindering a rapid recovery in the economy. Traditionally, the housing sector, buoyed by low interest rates and pent-up demand, has played an important role in propelling economic recoveries. The increase in housing sales and construction often is accompanied by purchases of complementary goods, like furniture and appliances, which magnify the effect of the housing recovery.

However, six years after house prices first began to fall, the pace of the economic recovery remains slow. Nationally, house prices have fallen by nearly one-third since their peak in the first quarter of 2006, and total homeowners’ equity in the United States has shrunk by more than one-half–a loss of more than $7 trillion. The drop in house prices has had far-reaching effects on families, neighborhoods, small businesses, and the economy, in part because so many American families–more than 65 percent–own their homes. The fall in house prices has caused families to cut back on their spending and has prevented them from using their home equity to fund education expenses or start small businesses. The decline in house prices has also impeded families from benefiting from the historically low level of interest rates, as perhaps only half of homeowners who could profitably refinance have the equity and creditworthiness needed to qualify for traditional refinancing.¹

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Before we begin our Sermon this Sunday, a bit of history:

Think back to the giant fraud that was Enron. It was enabled — indeed, it was only possible — by the criminal behavior of their “Big Five” accounting firm, Arthur Andersen. This massive fraud perpetrated on the investing public was only possible due to the cooperation and active participation of their accountant, who were found guilty of “obstructing justice when it destroyed Enron Corp. documents while on notice of a federal investigation” charges. For this sin relating to their handling of Enron’s audits, Arthur Anderson was forced to “decertify,” voluntarily surrendering their license to be Certified Public Accountants in the United States. By voluntary, we mean they had no other choice.

Hence, for their complicity in the Enron scandal, Arthur Anderson was taken out back like Old Yeller and put down. Their senior officers and accountants scattered to the other major firms with their clients in tow. Even their consulting firm, Accenture, luckily lost the name Arthur Andersen Consulting in 2000, removed all visible signs of affiliation.

Once Andersen was de-certified from Accountancy,  AA was no more.

Today, we have what appears to be a parallel fraud: The processing of foreclosure documents by legal services giant Lender Processing Services. Thanks to the diligent worh of Attorneys General in states such as Nevada, New York, Delaware, California (but not Florida), we are starting to learn the extent of what took place under the auspices of LPS:

•  former L.P.S. employee who worked in “attorney management,” overseeing firms that performed legal work for foreclosures, told Nevada investigators that L.P.S. required him to resolve issues raised by the firms at a rate of 30 foreclosure files every hour (2 minutes per)

• Former workers described their work as “surrogate signers.” Their job was to forge signatures on documents.

• Other employees were hired through temp agencies, paid $11 an hour and told that her job was “to sign somebody else’s signature on documents,” the lawsuit said. Investigators were informed she signed roughly 2,000 documents a day for months — well over 100,000 foreclosure docs.

• Notarization was similarly dishonest, with workers notarizing documents (as a Notary) that they had fraudulently signed as a surrogate.

• Borrowers were confronted with documents containing “false assertions about which entity was authorized to foreclose, and false assertions about whether the consumer was delinquent on a loan payment.”

I have a question for Bank of America and Citi: Why haven’t you thrown these LPS weasels under the bus? What dirt they have on you preventing a simple j’accuse! ? What the hurry to settle before an investigation?

The end game for this is fairly obvious: Find the fuckers who authorized this, prosecute and convict them, and throw their sorry asses in jail. If the orders came from high enough up the food chain, why not pursue a similar Arthur Anderson penalty. Wat this broad corporate policy, or the work of a rogue banker? There is the answer to the death penalty question. After all, if a legal services firm is committing fraud, what bank or law firm can ever work with them? Depending upon the outcome of these AG investigations, a corporate death penalty could very well be the appropriate remedy.

This is going to get very interesting this year . . .

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Source:
From East and West, Foreclosure Horror Stories
GRETCHEN MORGENSON
NYT, January 7, 2012 
http://www.nytimes.com/2012/01/08/business/mortgage-servicing-horror-stories-fair-game.html

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