Obama Admin: Look Forward! Even in the Face of Obvious Corporate Fraud!

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I’m not surprised by this–but I simply don’t understand how the Obama Administration can claim they haven’t found anything fundamentally flawed (though that could be HuffPo’s formulation) when thousands of people have been thrown out of their homes based on documents whose signers falsely attested to those documents.

U.S. Housing and Urban Development Secretary Shaun Donovan said Wednesday that the Obama administration will attempt to protect homeowners and police the kind of paperwork fraud that led the nation’s largest banks to temporarily halt foreclosures this month, but added that the administration had yet to find anything fundamentally flawed in how large banks securitized home loans or how they foreclosed on them.

“Where any homeowner has been defrauded or denied the basic protections or rights they have under law, we will take actions to make sure the banks make them whole, and their rights will be protected and defended,” Donovan said at a Washington press briefing. “First and foremost, we are committed to accountability, so that everyone in the mortgage process — banks, mortgage servicers and other institutions — is following the law. If they have not followed the law, it’s our responsibility to make sure they’re held accountable.”

He added, however, that the administration is focused on ensuring future compliance, rather than on looking back to make sure homeowners and investors weren’t harmed during the reckless boom years. The administration is “committed to forcing institutions to change the way that they conduct business,” Obama’s top housing official said, “to make sure these problems don’t happen again.”

When people were suckered into inflated mortgages, it wasn’t good enough for them to “make sure [those] problems don’t happen again.” They lost their homes, their credit ratings, and their savings.

But I guess that’s their own fault for being a mere human rather than a corporate person.

Administration Inches Closer to Rule of Law on Foreclosure Crisis

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…with this statement from Robert Gibbs:

As institutions are determining their next steps in addressing these issues, we remain committed to holding accountable any bank that has violated the law. In addition to strongly supporting the investigation by the state attorneys general, the administration’s Federal Housing Administration and Financial Fraud Enforcement Task Force have [sic] undertaken their own regulatory and enforcement investigation into the foreclosure process.

This is stronger than the repeated statements from HUD Secretary Shaun Donovan.

Let’s hope the Administration includes individual banksters in that statement.

Foreclosure Mill King David Stern Announces Big Management Changes

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David Stern’s company, the foreclosure mill that has removed thousands of Floridans from their homes, announced big management changes today. Otherwise known as abandoning ship:

DJSP Enterprises, Inc. (Nasdaq:DJSP) (Nasdaq:DJSPW) (Nasdaq:DJSPU) today announced that Stephen J. Bernstein, the Company’s Lead Independent Director, has been appointed as Interim Chairman of the Board of the Company. Initially, Mr. Bernstein’s role as non-executive Chairman will be a full time position as he provides Board support to the Company as it develops and executes plans to respond to recent developments impacting the Company and the industry. Mr. Bernstein replaces Mr. David J. Stern as Chairman of the Board. Mr. Stern continues in his role as Chief Executive Officer of the Company and will serve as its President.

The Company also announced the voluntary resignations of Richard Powers, as President and Chief Operating Officer, Kumar Gursahaney as Executive Vice President and Chief Financial Officer and Howard S. Burnston, as Vice President, General Counsel and Secretary, each of whom joined the Company in 2010. [my emphasis]

The only question is whether these guys were fired for being insufficiently loyal, or whether they’re trying to get out just before the sheriff arrives.

What Did David Stern Do with the Truck of Documents He Removed from His Office?

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4ClosureFraud published another of the depositions from the FL investigation into foreclosure mill David Stern’s office. In it, Kelly Scott, the assistant of Cheryl Salmons–the woman who oversaw the robosigner aspect of their business–included details on how Salmons appears to have created her own lost title affidavits, how they would backdate affidavits of proof of service for foreclosures when the borrower hadn’t been served properly, and reclassify files to hide them from Freddie Mac when auditors would come for a visit.

But one of tidbits that seemed to surprise the lawyers had to do with Stern moving a truck load of documents offsite to another office.

Q. Did they say anything about what’s going on with Stern or Cheryl Salmons or anybody else?

A. The only concern was that they were moving files out of the office into a different office and that Eighteen Inch Freight, I think, was picking them up. Something like that. Trailer freight, something like that.

Q. Do you know where —

MS. CLARKSON: Eighteen wheeler?

THE WITNESS: Yeah, eighteen wheeler.

BY MS. EDWARDS: Q. Do you know where they were moving them?

A. Supposedly they were being moved to Orlando’s office.

Q. And do you know why they would do that?

A. No.

Q. Do you know how long ago this was going on?

A. I think a month and a half ago.

Q. What kind of office is Orlando?

A. David Stern has another law office in Orlando, Florida.

Q. What office is that?

A. I don’t know.

Q. And was it connected with the office here in Broward County?

A. Yes.

Q. And do you know which — what the office is there or what the location is?

A. No, I just know it’s another law office for David Stern that he’s opened for foreclosures in Orlando.

Q. And did he just open it a month and a half ago?

A. No. He opened it, I think it was either sometime at the beginning of this year or the end of last year. I can’t remember.

Q. 2010?

A. Yeah.

Q. Or December 2009?

A. It could be around that time. I just can’t remember.

Q. Well do you know if these files were being moved out over concern of the investigation?

A. Oh, I don’t know.

Q. Or just because they were moving files?

A. They were just moving a particular bunch of files to that office to be reviewed. That’s what — You know, my friend expressed that they were going to be reviewing them over there.

Mind you, this is hearsay, something Scott relayed that one of her friends still at the firm told her. And she has no reason to believe this is a response to the ongoing investigation into the case. (This deposition was taken on October 4, so the description of Stern moving files a month and a half ago would put it in roughly August.)

But this is the problem with the current treatment of all this fraud as mere “mistakes.” Because it leaves the chain of custody of such documents in the hands of the perpetrators to treat just as Enron did.

HUD Secretary Donovan: Banks Should Fix Problems Caused by their Law Breaking

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Check out the following passage in HUD Secretary Shaun Donovan’s statement opposing a moratorium on foreclosures:

No one should lose their home as a result of a bank mistake. No one. That is why the Obama Administration has a comprehensive review of the situation underway and will respond with the full force of the law where problems are found. The Financial Fraud Enforcement Task Force that President Obama established last November has made this issue priority number one. Bringing together more than 20 federal agencies, 94 US Attorney’s Offices and dozens of state and local partners to form the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud, the Task Force is examining this issue and the Attorney General has said publicly that if it finds any wrongdoing the members of the task force will take the appropriate action. The Federal Housing Administration and Federal Housing Finance Agency have launched reviews to make sure servicers are in full compliance with the law. The Office of the Comptroller of the Currency has directed seven of the nation’s largest servicers to review their foreclosure processes, fix the processing problems and determine whether there is specific harm that has been caused in individual cases.

The message all these institutions are sending is the same: banks must follow the law — and those that haven’t should immediately fix what is wrong. [my emphasis]

Donovan offers a list of government agencies which have regulatory and legal authority to penalize the banks, but ultimately says that the banks themselves will be directed to police themselves.

The message these regulatory and law enforcement agencies are sending, Donovan says, is that the banks that haven’t followed the law should immediately fix what is wrong. Not, “the banks that haven’t followed the law should be prosecuted.” But “the banks that haven’t followed the law should make it right on their own.”

And while Donovan brags that the Financial Fraud Enforcement Task Force has been on the job for almost a year, it has done nothing about the multiple bank employees who have given sworn dispositions admitting to committing fraud on courts.

But that’s not all that surprising. After all, Donovan is also propagating the myth that this systemic fraud is just bank “mistakes.”

The rest of Donovan’s statement is no better. It tries to personalize the harm that hypothetically would result from a moratorium. But the examples make no sense and all basically assume that banks owning properties lead to declining property values; if that’s the case, then let’s crack down on deadbeat bank landlords. And it certainly misunderstands how a generalized problem with titles–the Administration’s refusal to address the underlying problem–will affect the housing market a lot more than a delay to address to address that underlying problem.

It all appears to be further indication that the Administration hopes that by letting the banks fix this themselves, the problems caused and covered up by the banks’ crimes will just go away.

How Much More Foreclosure Fraud Is Under Seal?

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The NYT has a fascinating story about the $75,000 house that led to the GMAC deposition on robosigning that finally alerted the world to the extent of the fraud behind foreclosures. It’s worth reading for the description of Thomas Cox, a lawyer who volunteers at legal assistance to make right for his years of doing foreclosures, the description of the errors GMAC made even after the court started looking closely, and the detail that GMAC has now spent more on legal fees trying to foreclose on this house than the house itself is worth.

But I’m particularly interested in this:

Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer:

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”

GMAC’s reaction to the deposition was to hire two new law firms, including Mr. Aromando’s firm, among the most prominent in the state. They argued that what Mrs. Bradbury and her lawyers were doing was simply a “dodge”: she had not paid her mortgage and should be evicted.

They also said that Mr. Cox, despite working pro bono, had taken the deposition “to prejudice and influence the public” against GMAC for his own commercial benefit. They asked that the transcript be deleted from any blog that had posted it and that it be put under court seal. [my emphasis]

GMAC’s first response to this affidavit was a request to the judge to prevent it from being posted to the Toobz (presumably 4closureFraud.org). But the judge refused.

Stephan’s deposition was taken to advance a legitimate purpose, and the testimony elicited has direct probative value to this dispute. Attorney Cox did not himself take action other than to share the deposition with an attorney in Florida. That the testimony reveals corporate practices that GMAC finds embarrassing is not enough to justify issuance of a protective order. Further, Plaintiff has failed to establish that GMAC has been harmed specifically as a result of the dissemination of the June 7, 2010 deposition transcript, given that similarly embarrassing deposition testimony from Stephan’s December 10, 2009 Florida deposition also appears on the Internet, and will remain even were this Court to grant Plaintiff’s motion. Accordingly, because Plaintiff has failed to satisfy its burden of persuasion under Rule 26(c), its Motion for Entry of Protective Order is denied.

There are, we are learning, depositions all over the country showing that servicer employees committed outright fraud. But presumably, every time they’re taken, the servicer attempts to hide them behind claims of trade secrets.

How much more evidence of corporate law-breaking is hiding in foreclosure courts under seal?

If Voluntary Moratoria Mean Banks Are Solving the Problem, What about Wells Fargo?

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Elizabeth Warren, presumably laying the foundation for an Administration deal with banks to not unwind the entire securitization paperwork problem in exchange for loan modifications, points to banks’ voluntary foreclosure moratoria as proof the banksters are trying to solve this problem (presumably meaning the foreclosure fraud, but not the larger problems).

She additionally stated that major servicers’ voluntary foreclosure freezes mean two things. First, this problem “is big, and it is serious,” and second, the voluntary moratoria represent evidence that “the issuers themselves are trying to get this problem solved,” she said.

But only three of the top five servicers have issued moratoria of any sort (and some of those are limited to judicial states). Citi (with 6.3% of the market) and Wells Fargo (with 16.9%) have not issued moratoria at all.

And yesterday, an FT story reported that contrary to Wells’ claims, it too engages in foreclosure fraud.

In a sworn deposition on March 9 seen by the FT, Xee Moua, identified in court documents as a vice-president of loan documentation for Wells, said she signed as many as 500 foreclosure-related papers a day on behalf of the bank.

Ms Moua, who was deposed as part of a foreclosure lawsuit in Palm Beach County, Florida, said that the only information she verified was whether her name and title appeared correctly, according to the document.

Asked whether she checked the accuracy of the principal and interest that Wells claimed the borrower owed – a crucial step in banks’ legal actions to repossess homes – Ms Moua said: “I do not.”

Now, I’m all in favor of loan modifications. But Administration talk about deals for loan mods is far too early, not least because all the banks haven’t issued moratoria (not to mention the fact that banks with moratoria seem to be continuing the foreclosures).The banks aren’t yet ready to solve the problem.

One of Obama’s signature traits is conceding on the most critical issues at the start of any negotiation, thereby preventing him from crafting a really useful deal. I fear the Administration is about to do the same with foreclosure fraud, too.

Treasury Sez Banksters Are Lousy Neighbors Who Broke the Law

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The Treasury Department gave Felix Salmon’s response to Crusader against Injustice Timmeh Geithner’s statement on foreclosures more attention than it gave mine–they emailed a response to Salmon’s questions about why foreclosures would hurt property values. And their response is even more telling than Crusader against Injustice Timmeh Geithner’s original statement.

First, at least 40 % of all homes in foreclosure are vacant.  Delaying conveyance of title and resale has devastating impacts on neighborhood values and increases demand for municipal services.

Also, a blanket moratorium equally impacts the banks that are acting in accordance with the law increasing costs for servicers and investors. This threatens the safety and soundness of smaller community banks that are not part of the document problem and ultimately limits market liquidity preventing low and moderate income borrowers from refinancing or buying a house as investors are ever more hesitant to lend to all but the most pristine credit borrowers.

First, note this statement very closely: “a blanket moratorium equally impacts the banks that are acting in accordance with the law.” Treasury is arguing that a blanket foreclosure moratorium will also hurt banks that acted in accordance with the law. Necessarily meaning, of course, that Treasury believes that some banks acted in accordance with the law, but some didn’t.

The Treasury Department is logically stating that some banks–big ones–broke the law.

Last I checked, Treasury had a pretty big role to play in law enforcement (just ask the terrorists). So if Treasury is so certain big banks broke the law, has it made referrals to DOJ?

Also note this formulation:

First, at least 40 % of all homes in foreclosure are vacant.  Delaying conveyance of title and resale has devastating impacts on neighborhood values and increases demand for municipal services.

At least 40% of homes in foreclosure are vacant. So up to 60%–a majority–are not. So Salmon’s point–that pushing more people into foreclosure will result in more empty homes–still stands, as foreclosures will have the result that up to 60% of foreclosures not already vacant will become vacant.

But that’s not the part I found most interesting. We’ve got to rush conveyance of the title and resale to protect property values of neighborhood properties and limit demands on municipal services. The conveyance of title I get; until the bank officially owns the property, it can’t do anything about maintaining a house. But resale? Is Treasury saying that until the property is sold, it won’t be cared for? That banksters don’t care for the properties they get in foreclosure? Banksters don’t mow the lawn? Don’t keep up the houses? Rely on municipalities to do what homeowners are obligated to do? I mean, yeah, I realize that is, in fact, the case. But why is Treasury simply observing this, and not haranguing the big banksters–the ones who Treasury apparently believes have broken the law–for free-loading on municipalities rather than paying for the things they, as property owners, are obligated to do?

And on top of the fact that an official statement from Treasury admits that banksters are lousy neighbors and broke the law, the entire premise is still flawed. Yes, for the 40%+ of houses that are vacant by foreclosure, postponing the ultimate sale of foreclosures will affect the property values of neighborhood properties. But until someone verifies that foreclosures have clean paperwork, up to and including the note, won’t foreclosures have an even more diminished value on the housing market? If that’s true, rushing more foreclosures onto the market without first ensuring that those foreclosures come with proper paperwork will have an even greater depressive effect on home values (or they should, if people were honest about what was going on).

Finally, note the implicit endorsement. We’ve got to continue to let community banks operate normally so we don’t penalize the banks that played by the rules. Okay, finally something I’m very sympathetic with! But if Treasury knows that the big banks broke the law and the community banks have played by the rules, then why are we spending so much money bailing out the criminal banks? Why not just reward the community banks for doing it right?

JP Morgan Chase’s Several Week Timeline

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In addition to dropping MERS today, JP Morgan Chase had an earnings call at which Jamie Dimon was asked questions about JPMC’s foreclosure fraud. Calculated Risk has a transcription (both the AP and WSJ attribute these comments to Dimon, though CFO Douglas Braunstein made comments about the foreclosure fraud as well). But I just wanted to note the contradictory stories Dimon is telling about timing.

Analyst: I was wondering if you could give us any sense for timing of resolution in terms of reopening these 115,000 cases?

JPM: It’s going to take several weeks to go through the files and make sure and correct any errors that are in there. The underlying stuff is all accurate. So that’s the key substance. Obviously we know there’s a lot of state AGs and we have conversations with them. We’re hoping [to get back to] the normal process — for us, the sooner the better for everybody involved. We don’t think there are cases with people have been evicted out of homes where they shouldn’t have been. These foreclosures go through multiple process, so we’re hoping it will be sooner rather than later and those conversations are starting to take place.

[snip]

Analyst: And the foreclosure stuff, outside of how it directly may impact you or somebody else, how do you look at the drag it may have on the housing market, kind of the macro impact, what do you think about that?

JPM: Again, I hope — this is a hope. This is not a knowledge. Is that when people take a deep, sigh breath, go back to the right, look to the substance underlying the files and go back to modifying, foreclosing and doing the right thing, all told, it could be a blip. Talking about three or four weeks it will be a blip in the housing market. If it went on for a long period of time it will have a lot of consequences, most of which would be adverse on everybody.

Analyst: The foreclosure suspension, it’s a matter of weeks instead of months, did I hear you say that?

JPM: No. I didn’t say weeks to clean up the files. We actually have to have little in depth conversations with regulators and AGs and stuff like that. So I don’t know exactly when. I’m hopeful that it all starts to move at one point. I don’t know if it’s going to be three weeks or five. But I think it will be a real shame if we don’t get this resolved and moving again.

Analyst: In all likelihood you should be allowed to foreclose as we go into next year.

JPM: I hope so. It’s not up to me. [my emphasis]

First, note the clear reversal. At first, Jamie Dimon says it will take several weeks to “correct any errors” (meaning, to write new affidavits with proper notarizations to replace the ones he admitted to earlier). When asked about the overall impact on the housing market, Dimon gives a classic, “nice economy you’ve got here; it’d be a pity if it died if it takes us longer than three or four weeks to fix ‘our errors.'” But based on that statement, an analyst clarifies that he imagines it will take weeks. To which Dimon response, “I didn’t say weeks to clean up the files.”

But he did.

The real reason for his squirminess–aside from the fact that he all but admits that his company had fabricated affidavits and notarizations, amounting to fraud on courts in multiple states–appears to be the awareness that 50 Attorneys General and some unnamed regulators have him by the balls and will tell him, MOTU Dimon, when he can start foreclosing again. (Nowhere does he admit to doubt that JPMC will be able to foreclose.) He seems to be hoping that if the regulators and prosecutors just look at the “substance underlying the files”–that is, look at the delinquent payments rather than the insufficient paperwork–they’ll green light foreclosures and we can all go on to pretend that the banksters haven’t been engaged in systematic fraud to hide their larger systematic fraud.

But I do find it remarkable that in an earnings call, Dimon all but admitted to fraud, admitted that the Attorneys General will dictate what happens going forward, and yet didn’t lay that out (or the underlying problem of fraud built on fraud) as an earnings risk. It’ll be interesting if JPMC admits the legal jeopardy to the SEC.

Why Does Alabama Love Foreclosure Fraud?

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This is just an observation.

As of current reporting, Alabama’s Attorney General Troy King is the only state AG not to join in the joint investigation of foreclosure fraud. Even Michigan AG Mike Cox, whose spokesperson said investigating foreclosure fraud would amount to “politicizing the struggles of Michigan families,” has joined the investigation.

I find it interesting that, thus far, AL’s AG is not participating since AL is the state that tried to give us the eNotary bill. It was first introduced–in 2006, and then repeatedly since–by Robert Aderholt, a Congressman from AL. And it was pushed through after Patrick Leahy got snookered by a bunch of notaries in town for a Calvin Coolidge ceremony. But it was pushed through with the help of Senate Judiciary Ranking Member and Alabama Senator Jeff Sessions.

Now this may be one big coinkydink. Or it may be that Alabama’s Republicans just tend to like giving banksters unfettered reign (though AL’s other Senator, Richard Shelby, is calling for an investigation).

But I just find it worth noting.

Update: Looks like AL has now signed onto the investigation.

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