How Obama’s DOJ Sold Out American Citizens In the Robo-Signing Criminal Plea

Yesterday afternoon there was a critical guilty plea entered in the ongoing robo-signing mess that lies beneath the festering mortgage crisis.

The former executive of a company that provided documentation used by banks in the foreclosure process pleaded guilty to participating in a six-year mortgage-forgery scheme.

The deal announced Tuesday by the Department of Justice represents one of the only successful criminal prosecutions resulting from the “robo-signing” scandal that surfaced two years ago.

Lorraine Brown, 56 years old, of Alpharetta, Ga., who is a former executive of Lender Processing Services Inc., LPS of Jacksonville, Fla., pleaded guilty to a scheme to prepare and file more than one million fraudulently signed and notarized mortgage-related documents.

A criminal guilty plea to straight on systemic fraud like this (here are the pleas documents) ought to have far ranging consequences for home and mortgage holders, not to mention local county recorders, whose quiet title and fee income, respectively, were damaged by the fraud, or at least so you would think.

A long time attorney involved in the field of mortgage fraud, Cynthia Kouril, writing at Firedoglake, laid out well the paths to recourse plaintiffs damaged by this fraud should have:

At the end, I said that this could be a game changer. In the comments, folks thought that was a reference to the fact that for once we have a criminal case which involves a top tier executive. That is a big deal no doubt, but not the reason this could possibly change everything.

Homeowners who are being foreclosed upon based on a document chain that includes documents prepared by DocX/LPS have a built-in defense, and actually a counterclaim against Ms. Brown’s company. The defense is that the bank offering these documents as evidence no longer has any right to rely on them as proof of anything, and any bank offering a DocX or LPS document as evidence after yesterday knows or should know that they are committing a fraud on the court and on the homeowner.

Secondly, it would mean that the bank would be unable in many instances to prove an essential factual element of its case, that the mortgage and/or note was transferred to the foreclosing entity, and the matter would be ripe for a Summary Judgment motion by the defendant homeowner. This ONLY applies if there are DocX or LPS documents in you chain of transfer (just like the various MERS defenses only applied if your mortgage was put into the MERS system). Also, there may be other facts or circumstance in individual cases that would moot this point.

That sounds marvelous for so many homeowners and other victims, but it is not necessarily going to be the case. Why? Because the Obama Administration and their Department of Justice intentionally sabotaged the ability of these victims to use this plea against the co-conspirator banks, mortgage brokers and mortgage servicers. David Dayen of Firedoglake News is one of the only ones who have caught on to this whitewashing by the DOJ:

Sadly, the federal plea deal strains to hold servicers harmless for this conduct. See this key section, from the “Factual Basis” of the plea:

Brown represented to clients that DocX had robust quality control procedures in place to ensure a thorough and proper signing, notarization, and recordation process. As a result of these representations, clients hired DocX […]

Unbeknownst to DocX’s clients, the Authorized Signers were instructed by Brown and other DocX employees to allow other, unauthorized, DocX employees to sign, and to have the document notarized as if the actual Authorized Singer had executed the document.

This is just bunk. The idea that servicers – arms of the biggest banks in America – were just duped by Lorraine Brown’s claim of “robust quality control procedures” makes no sense whatsoever. They may not have known the mechanics of Brown’s document fraud, but that’s just because they wanted to insert a layer of plausible deniability – in fact for circumstances just like this. But they definitely wanted documents they could use in court to foreclose on borrowers as quickly as possible. And they didn’t exactly have the ability to do that though any other method than fraud.

That is exactly right. The plea allocution expressly covers the banks asses about knowledge of the forgery. So, as it stands now banks and servicers are also “victims” of Lorraine Brown’s fraud. And that is nothing but pure, unadulterated bullshit, specifically manufactured in the plea process by the government to shield the financial industry at the expense of decimated citizen homeowners.

The pleas did NOT need to include that gratuitous financial industry exculpation, it was sheer treachery by the Obama Department of Justice on the citizens they are supposed to be representing. The subject language did absolutely nothing to mitigate, aggravate, nor perform any function whatsoever, as to the parties to the plea, i.e. the government and the defendant, Lorraine Brown. It’s sole function was ass covering and water carrying for the bankers and financial industry.

36 replies
  1. posaune says:

    And the ultimate outcome? A huge land grab. Welcome to Renter Nation, where new-fangled REITS lord it over the serfs.

  2. Casual Observer says:

    After all this time, didn’t think it was possible to still get angry at this administration. Wrong again.

  3. DWBartoo says:

    Thank you, bmaz.

    Your last two paragraphs say it all … and make clear the “direction” the second Obama administration will “take” … “looking forward”, on any number of issues.


  4. Peterr says:

    If the banks are not parties to the charges filed in this case, how does the statement in the plea agreement about what the banks did or didn’t know, or did or didn’t do?

    Even more to the point, if Brown were on the witness stand and made a statement like this, wouldn’t it be stricken as hearsay?

  5. bmaz says:

    @Peterr: The argument would, otherwise, be that any plaintiff that could establish their lender/bank used Brown/DocZ’s services on their mortgage/servicing/foreclosure documents could argue the fraud was evidenced by the criminal plea of Brown. But the DOJ has removed that potential use by intentionally placing bullshit language in the factual basis for the plea.

  6. Peterr says:

    @bmaz: I understand WHY the banks would like this in there. What I can’t figure is how it is legitimate.

    How is it not hearsay on the part of Brown?

  7. DWBartoo says:



    “DocZ” has a more zing of a ring than DocX, bmaz, especially in the “slang” …

    Perhaps though, you anticipate the new and continuing Obama “orthoDocZ”?


  8. Peterr says:

    @DWBartoo: Lorraine Brown initialed every single page of the plea, which included the item bmaz cited from DDay’s post:

    Brown represented to clients that DocX had robust quality control procedures in place to ensure a thorough and proper signing, notarization, and recordation process. As a result of these representations, clients hired DocX […]

    Unbeknownst to DocX’s clients, the Authorized Signers were instructed by Brown and other DocX employees to allow other, unauthorized, DocX employees to sign, and to have the document notarized as if the actual Authorized Singer had executed the document.

    How can Brown affirm what other people did, or what motivated them?

    By signing the plea agreement, she’s saying “Yes, this is what went on here.” The DOJ is letting her — actually, they’re helping her — put words in the mouths of every bankster with whom DocX worked.

    That’s the definition of hearsay.

  9. marksb says:

    So they’re saying it was just a few bad apples? What a surprise.

    Besides, they get the term “robust quality controls” wrong. Quality controls, by their very nature, are systems that regularly and randomly check the quality of the product when it is completed. In the case of a computer board, QC grabs one, inspects it, and puts it on the test bed to make sure it works and is up to the standards of manufacturing.

    In this case, a “robust quality control” would randomly pull documents to verify it was processed and signed according to their documented standards. Obviously they didn’t have a quality control system at all.

  10. FrankProbst says:

    I don’t see how this helps the banks much. Yes, it’s obviously better than saying they knew that massive fraud was taking place back then, but they certainly know now. And I don’t see how you can foreclose with a tainted document chain. I can see how the banks would have a good civil case against Lorraine Brown, because she tainted the document chain. But I don’t see how they can get to the homeowners. If everything Lorraine Brown did was fraudulent, then it seems like you’d have to go back to the pre-fraudulent documents in order to foreclose, wouldn’t you?

  11. DWBartoo says:


    Of course, you are technically correct, as I understand it, Peterr.

    However, it was the DoJ who wrote the plea, including, specifically and precisely, what the DoJ wanted to include and to “spring from” or “grow from” the plea.

    It is obvious that the Obama-Holder DoJ wishes to make clear that the federal government does not wish nor intends to allow culpability to “rise” any higher up the “chain” … it is a VERY clear signal to the courts AND to the legal profession … that the Banks and their executives are not only “off the hook” but mere, poor, innocent victims of the wiles of a cunning deceit engineered and undertaken by Lorraine Brown.

    It stinks to high heaven, obviously. However, recalling the words of a famous Obama supporter regarding a certain blog, “This is not a democracy, it is a business …”; we must now realize that such is precisely the “way” that the federal government is now “held” to be.

    Understand, I am not reacting cynically in so saying, I am, instead, pointing out the underlying cynicism behind what the DoJ is attempting to do …

    Whether it will be gotten away with remains to be seen.

    Frankly, I would not bet any money that it will NOT be gotten away with … as it is, simply, “more of the same” …


  12. ryan says:

    So victims would include people who did take out mortgages, did fail to make payments, but still want to keep their homes? And the villain here is a bank, investor or investment company that almost certainly did buy a mortgage, but lacks a notarized signature proving it?

    I don’t see the scandal here. I’m in favor of various means of helping people who are underwater, and people who can’t pay their mortgages. Hell, I’d be all for inflating the currency by 20%, which would have the effect of putting most of the underwater mortgages back at par, essentially by taking 20% of the real value of a loan away from the lender. But I don’t believe people should be able to just stop paying their mortgages and keep their houses. And I don’t think investors who believed they were buying mortgages should be left standing because the notarized signature was really of a different person at the same company. This really seems trumped up to me.

    Macroeconomic ways of fixing these problems don’t have the effect of letting scammers off the hook.

    We dealt with the mortgage crisis horrendously. But that doesn’t mean a better answer is forcing banks to give houses away to anyone who prefers not paying instead of paying.

  13. cynthiakouril says:

    I don’t think we are in disagreement.

    The plea factual statement did include unessary laguage aimed at covering the baks butts, however, that probably had more to with not wanting to admit that DOJ had already given away the farm with the 50 State settlement.

    If the plea had inculpated the banks, they already had immunity due to the 50 state deal and it would only have made DJ look bad/worse.

    So, no homeowners can’t claim fraud for prior uses of the DocX docs by banks, but they can claim that the banks cannot prove the chain of title b/c we all now know that the DocX docs are meaningless.

    So, it is a powerful thing, just not a self executing thing.

  14. DWBartoo says:


    What you suggest is the way is should “now”, and moving forward, be, FrankProbst, time will tell whether in fact it is …

    Unless many attorneys are willing to work on a contingency fee basis, then very many endangered homeowners may well not be able to “afford” the “price” of seeking justice … which fact, I must suggest, has been, likely, already considered, by those who wish to protect the Banks and the Big Executives.


  15. masaccio says:

    The banks and servicers might plead that they are shocked, shocked to learn that their documents are forgeries. But. The documents are still forgeries, and actions taken based on forged instruments may well be void ab initio.

    And for the future, any bank that has one of those forged instruments, especially assignments, in its chain of title will not be able to foreclose. Presenting a forged instrument to a court knowingly is grounds for contempt. I see a bunch of foreclosure mill lawyers suddenly learning how to identify a robo-signed document, lest they spend time in their county jail.

  16. cynthiakouril says:

    @ryan: because it was the bankers not the homeowners who created these systems, and bankers who did not engage in underwriting of the mortgages to find out if the borrowers could afford to pay, b/c the banks were going to unload these mortgages on investors.

    It’s the people who created the machine wh have to be consequnced, not the people who were mowed down by the machine. That’s the only way to make sure no has incentive to build such a machine again

  17. DWBartoo says:


    Precisely, Cynthia, and the DoJ is attempting to distance the Banks from having any part in the “creation” (and operation) of those “machines”.

    Do you think the DoJ will succeed?


  18. bmaz says:

    @Peterr: There are a lot of things in play there. Brown is now free to back the banks at trial without being able to be impeached by her admissions. Secondly, if a certified copy of the pleas were proffered later, it arguably could avoid hearsay objections through an exception. There are a LOT of uses that COULD have either been made, or at least argued, that are now fundamentally weaker – because of language the government insisted on.

  19. Peterr says:


    As I look at that language, I think it says more about the DOJs willingness to let bygones be bygones when it comes to pursuing criminal charges against the banks than it does about how this plea might be used at a civil trial between a homeowner and a bank.

    If the bank puts this forward as evidence, the homeowner’s lawyer is going to scream “hearsay” and at a minimum demand to depose the people at the bank that hired DocX and worked with them on a regular basis. You’re a defense attorney — would you let this go by unchallenged? This is the DOJ and Brown saying what they believe, but nowhere is there any bankster’s signature on this plea agreement. If the bank wants to put it forward and say “we agree with this,” let them do so — but it opens them up to a very, very rough line of questioning.

  20. bmaz says:

    @cynthiakouril: Also, agreed as to the supposed immunity. But, remember, there were still individual paths that were left post “settlement” (not that more than a handful could ever muster the resources to mount the effort), there were some that were pending, and then there are the county recorders defrauded. Quite frankly, without that language in there, it could have been argued that the entire settlement was yet another fraud (which you kind of alluded to in your comment). The DOJ may not have liked that, but it would have been the truth.

  21. bmaz says:

    @Peterr: It is BOTH. And either side is free to argue hearsay at any time on anything. But I think you are misapplying the term here, and secondly the point was as to plaintiffs potential use of the guilty plea, not the banks.

  22. Sojourner says:

    There is another aspect to all this that I have not seen addressed anywhere… Maybe I am chasing a rabbit trail, but I would be real curious to know how many $$$$$$ will have to be shelled out by bond companies due to the forgeries. I know that in both Texas and Louisiana, notaries must obtain a bond to cover them in case of unintentional mistakes or willful misconduct. I think it is probably true in most other states, as well.

    With that said, I would think the companies that provide notarial bonds are on the hook for quite a bit. In turn, they will try to collect from the notaries who attested to forged documents.

    Anyone have any idea of the domino effect this could have?

  23. HotFlash says:


    You noted that “The documents are still forgeries, and actions taken based on forged instruments may well be void ab initio.”

    If so, then the MBS’s and any other derivatives based on them would be junk, too? Toxic assets indeed.

  24. jo6pac says:

    Well I would like to say I’m suprised but it would be a lie. 0 puppet the holder has done another fine job protecting his friends on ws and F*&^ Main Street.

  25. orionATL says:


    if underwriters are used/employed,

    if they do their income vs. monthly liability checking properly,

    there will be minimal mortgage fraud originated by home buyers.

    if there are no, too few, poorly trained, or bought off/waved off underwriters,

    then there will be mortgage fraud – encouraged, or facilitated, or ignored

    by mortgage lending institutions.

    who committed fraud depends on who did or did not insist on high-quality underwriting.

    high-quality underwriting prevents mortgage applicant fraud.

    lack of high-quality undertaking is the key signature of intentional bank-facilitated mortgage fraud.

  26. ryanwc says:

    @cynthiakouril: I guess you didn’t read closely enough to notice I had answered that argument in my original comment. I’m all for knocking the investors, but there are much better ways to do so than simply letting a million people foreclosed on 2-4 years ago back out of that foreclosure on grounds of flawed paperwork.

    What the government has actually done is make banks pay into a fund to help people who were harmed. They defined harm this way:

    – The mortgage balance amount at the time of the foreclosure action was more than you actually owed.
    – You were doing everything the modification agreement required, but the foreclosure sale still happened.
    – The foreclosure action occurred while you were protected by bankruptcy.
    – You requested assistance/modification, submitted complete documents on time, and were waiting for a decision when the foreclosure sale occurred.
    – Fees charged or mortgage payments were inaccurately calculated, processed, or applied.
    – The foreclosure action occurred on a mortgage that was obtained before active duty military service began and while on active duty, or within 9 months after the active duty ended and the servicemember did not waive his/her rights under the Service members.

    These criteria get at the validity of the assignments and underlying documents. Were all investors actually assigning their interests? Did the bank keep the documentation sufficiently orderly that it knew it was still negotiating with a homeowner about adjustments? … that it knew what fees were legal and proper? … that it knew and told you accurate account balances?

    Presuming the invalidity of the documents would simply create another year or two of chaos in the housing market, leaving many people underwater and thus stuck in a house, perhaps preventing them from taking a job because they can’t move; while banks duplicate the same process, going to the same investors, getting the same assignments (except they’ll use 10-15 companies exactly like DocX who’ve been given legal signatory authority, rather than 1 company). Very few people who’ve already been foreclosed on will regain title to a house on which they had stopped making payments long before foreclosure took place. In the meantime, neighborhoods like mine will continue to be plagued by hundreds of thousands of properties in a state of suspended animation, eaves sagging, roofs leaking, 2nd-story porches sometimes collapsing like has happened to two properties I drive by on Kostner Ave. every morning.

    I don’t think you answer the problem of moral hazard for banks by creating new moral hazard for mortgagees. Yes, banks are responsible for making crappy loans. But so are the people who took out those loans. Because banks have greater capacity to understand market forces, we have always given mortgagees an out, quite literally – if you’re above water – you sell the house and pay off the loan. If you’re underwater, you can default and walk out of the house, and the bank takes most of the loss. We don’t need to give mortgagees the right to default and still keep the house. There are better ways to punish banks.

    There is ample ground for criticizing the administration, because there were many avenues to restore the housing market, 4 years ago and today. But this particular decision is a good one.

  27. bmaz says:

    @ryanwc: Well, except that “fund” you describe is not doing jack for actually damaged people. And “moral risk”, after the across the board financial hell that the financial industry has put the country through is one of the most contemptible phrases I have ever heard in my life. Soulless banks, and those affiliated with them, that have for years engorged themselves on societal fabric destroying immoral practices do not have the right to EVER trot out shit like “moral risk”.

    It is NOT just loans at issue, even with the bogusly induced, fee engorged, shitbag loans many people were issued, they still might have been able to cover had the economy not cratered, had they not lost their jobs etc., a predicate caused by the rapacious nature of banks and MOTUs. They created the Petri dish of hell that blew up. So, tell me Ryan, what should be the moral risk for those people? You blithely have no issue about assigning it to people and families that later were so decimated they couldn’t pay in the hell they were thrown into, but what about the craven bankers and financial products people and industry? What then should be the comeuppance for their, shall we say, “immoral risk”? Should they forfeit their ill begotten booty? Their livelihoods? Perhaps, indeed their lives (seepuku would be the expected resulted in other cultures)? Where do you stand on that Ryan?

  28. ryan says:

    @bmaz: Oh please. Don’t be an idiot, BMaz. I said (twice, for fuck’s sake) I’m all for inflating the currency, which would get tons of people out from underwater, while simultaneously taking a huge bite out of the asses of people with money. Spare me the homilies about how people should be able to just stop paying, which hurts all the normal people who do pay their loans. You’re so intent on causing chaos for banks that you can’t even stop to consider that the method you’re focused on would cause chaos for regular people too.

    Frankly, just about everybody was fine with lax fiscal and monetary policy through the Bush administration, at the point that government should have been “leaning into the wind.” It wasn’t just bankers. It wasn’t just wealthy people. Banks didn’t create the bubble and subsequent crash alone. As I said above, they should bear the bigger share of the burden. Foreclosing on underwater houses isn’t profitable. And I’m all for people who are underwater just walking away, which the banks hate. But despite that, I don’t think people should get to walk away from the payments and keep the house.

    Obviously, mentioning that is equivalent to asking people to commit harakiri. (Where’s the eye-roll button on this blog?)

Comments are closed.