The US Mortgage Debacle

IN THE CIRCUIT COURT OF THE SIXTH JUDICIAL CIRCUIT IN AND FOR PINELLAS COUNTY, FLORIDA

The fact that the Judge prejudged the case, so much so that she entered conformed copies of a Final Judgment before the hearing even began, requires disqualification.

Actually, I think life in jail would be more appropriate.

It's one thing to have sausage-machine "justice", verdict first, trial afterwards - but one should at least obey the forms.

From Naked Capitalism:

These new foreclosure-only courts are special creations of the Florida legislature, funded separately from the usual court system. They are manned by retired judges, which means in many cases they are not familiar with real estate law.

But perhaps most important, the explicit objective of these courts is to clear up the backlog. And that is coming to pass not by the Legislature having thrown enough resources at the problem (that is, having greatly enlarged court capacity to process more cases in parallel) but by pushing for faster resolution. The problem is that an accelerated process runs roughshod over due process and allows banks to foreclose when they may not be the right party, or worse, when the foreclosure is the result of servicing error.

Let’s look at one example of banana republic faux justice in the US, via a speech by foreclosure court Judge Roger Colton to his court on how the day was going to go. It’s simply breathtaking. He says that if the bank is foreclosing, he’s not going to consider any evidence that the foreclosure is in error (servicing errors, plaintiff can’t provide proof it owns the note, which means it might not be the right party and procedurally, means it lacks standing to take action). He says he has already heard everything, there is a lot of unemployment in the area; he is going to schedule a court date, but that is merely a deadline for negotiation. In other words, he makes it abundantly clear he has no interest in hearing evidence. When he gets to seeing a defendant after his speech to the court (p. 13), he rubber stamps what the bank wants without even considering the evidence. And apparently his entire day went like that. The summary from an attorney who was representing a client before him that day:

On 8/30, I had a Summary Judgment Foreclosure hearing on Palm Beach County’s “Rocket Docket”. The judge spoke for 14 minutes to the crowd, of mostly pro se defendants, about how they should just agree to the summary judgment and the plaintiffs, (whose attorneys (Shapiro & Fishman had a dedicated courtroom and to whom he referred to as “my attorneys”) would be gracious (Ha!) enough to allow them to stay in their homes for 120 days if needed (even though the statute says he only has to give them 30). When it came to hearing arguments which were fully briefed and provided to the court (pursuant to the instructions of the Divisions head judge) he only allowed 30-60 seconds for argument, failed to read any of the papers, failed to review the plaintiff’s foreclosure package,flatly ignored the Affidavit filed in Opposition, ignored my plea for a trial, signed the judgment and dismissed me. I never was permitted to even read the proposed judgment or to examine the “newly discovered” allonge which Shapiro’s counsel said I had no right to see.

Newly discovered allonges (separate documents with endorsements on them) are fakes; this is the new preferred method of document fabrication. Per the UCC (Uniform Commercial Code), an allonge is to be used ONLY when all the space that could be used for endorsement of a note has been used up. That means margins and the reverse side. And when an allonge is employed, it has to be so firmly attached to the original as to constitute a single document. Hence, no way can it travel separately and suddenly be discovered if it were legitimate.

The Laws, it appears, are for the little people. Documents are being blatantly fabricated, and the courts staffed by "retired Judges" who aren't actually superannuated. The usual reason for "retirement" in such cases is such blatant corruption or sheer incompetence that it can't be ignored, and the offender quietly eased out before too much more scandal is caused.

The whole mess that's caused the need for such sausage-factory systems is explained at Rortybomb in Foreclosure Fraud For Dummies.

In summary, Property Law in the US relies on title, proof of ownership, to be proved by physical pieces of paper, notes, with annotations and changes all witnessed. These legal requirements have been ignored. Mortgages have been bundled, securitised, commoditised, into more marketable packages suitable for large scale investments. Have a $200,000 mortgage, it's not particularly saleable. Have a package of 200 or more mortgages, worth in aggregate $50 million, and large-scale investors become interested. While default may happen on one or two, requiring expensive foreclosure and recovery costs, in aggregate the risk is lower. Unless the market collapses, and then they're up the creek.

But carrying around notes and pieces of paper, notarising all the changes of ownership as packages are aggregated, split, sold, re-sold etc was just too hard. It would require thousands of such notarisations per day, and to do it properly, checking title and making sure there was no mistake, that might take a good legal person several hours on each one. Far too expensive. So they didn't bother actually doing any of that, they just employed junior "robo-signers" to systematically perjure themselves and state under penalty of law that it had been done.

That's if they had the notes in the first place. Often they didn't. The firm they bought the mortgage from never received them from the previous owners - who are now out of business.

See Laws, little people, relation to.

Now the whole system would collapse if the courts didn't just cut corners, but make the circles rounder. This has been attempted... but there have been people evicted from their homes who never had a loan, and others who have paid it off but suddenly find half a dozen financial institutions each claiming sole ownership. Sometimes the banks have sold property they didn't own, and sometimes they've sold the same property multiple times to different buyers. This judicial attempt to take short-cuts and ignore mere laws to regularise an irregular situation has resulted in disaster, and some states now have moratoriums on all foreclosures until things are set to rights, and the mess sorted out.

From the Daily Caller:

Tomorrow, a bank—not your bank, but any bank—could evict you from your home. Even if you didn’t know the bank was foreclosing. Even if your mortgage is paid off. Even if you never had a mortgage to begin with. Even if the bank doesn’t hold a single piece of paper that you signed. And major banks not only know this fact, but have spent millions of dollars to defend it in court. Why? The answer starts with a Jacksonville homeowner named Patrick Jeffs.

In 2007, Deutsche Bank sued Jeffs for his home, which is a necessary step in the process of foreclosing on a homeowner in the state of Florida. Curiously, despite the fact that he immediately hired a law firm to defend his property when he found out about the foreclosure, neither Jeffs nor his attorneys were at the trial. That’s because it had already happened. Deutsche won by default because Jeffs wasn’t able to travel backwards in time to attend, even though the trial featured a signed affidavit indicating that he had been served his court summons.

The only problem with the summons Jeffs supposedly received was that it had been conjured out of thin air.

In June of this year, a Florida court ruled that the document was fraudulent, as the person who was supposed to make sure Jeffs was served had mysteriously received a copy of the summons before the lawsuit had even been filed, and Jeffs never even saw the copy. The text of that ruling was posted on various financial news websites in September. The lawyers that Jeffs hired to defend his case say that fraud such as this is not uncommon. It’s a widespread problem, and it has cost countless families their homes.

“I think it’s safe to say that 95% of the foreclosure cases in Florida involve some form of fraud on the part of the bank,” David Goldman of Apple Law Firm, PLLC told The Daily Caller in a phone interview. “It’s probably closer to 99%. And the court system is helping them get away with it.”

A 95% rate of fraud sounds preposterous, but the number was repeated by a paralegal familiar with the case, Lisa Beasley, as well as Michael Redman, who was prompted to create a website called 4closurefraud.org after enduring personal experiences with the matter.
...
Earlier this year, Goldman worked with Jane Doe, an elderly woman whose real name couldn’t be disclosed for legal reasons. She had just spent several weeks outside of her home state of Florida visiting relatives, and she was current on her mortgage payments, which she had been paying for the past 15 years. She even called up her bank during her trip to ask about the best way to send in her latest payment. The bank told her that it wasn’t allowed to discuss the mortgage with her because her husband was the property owner, not her. But the bank couldn’t discuss the mortgage with her husband, either. Why? Because he was dead. And he had been for five years. Confirming this fact would have taken mere minutes.

Instead, when Jane returned home, the locks to her house had been changed and all of the property inside the house was gone. She still hasn’t recovered that property, and the bank hasn’t even told her where it is. According to Goldman, the wrongful repossession was first admitted, and then, inexplicably, the bank actually changed its mind and tried to make the outrageous claim that the homeowners’ association was actually the entity which had ultimately decided to change the locks and empty the house.
...
Earlier in the year, Bank of America “foreclosed” on Charlie and Maria Cardoso, removing all of their property and changing the locks even as a realtor employed by the bank itself told it that there was no mortgage on which the Cardosos could skip payments. Eventually, the papers used by Bank of America were shown to have the wrong address. Someone, somewhere guessed.
...
On September 23, the bank “foreclosed” on a Ft. Lauderdale house owned by Jason Grodensky. Phone calls and emails elicited no answers, and the problem was only resolved after Grodensky took the story to the media and received national attention. There should have been no way for Bank of America to take control of the property. Instead, Grodensky discovered that the title to that property had already been sold. The bank recovered the title at its own cost.
...
This week, Florida television station WFTV reported Nancy Jacobini’s story. JP Morgan’s lawyers had sent a contractor to change the locks on Jacobini’s house. She actually happened to be sitting on a couch inside that house at the time, which means that she could have simply opened the door for the contractor in response to a simple knock—and it also means, according to Jacobini’s lawyer, that changing the locks was illegal, because the house was still occupied. Instead of a knock, Jacobini heard someone breaking through her front door, grabbed her phone and hid in her bathroom, where she called 911. The breaking and entering was just an extra helping of crime. And here’s the kicker—not only was Jacobini occupying the house, but JP Morgan hadn’t even foreclosed. At every step along the way, the rule of law simply didn’t exist.
...
A man named Jeffrey Stephans testified on September 14th that he had signed off on affidavits which he didn’t actually examine. Those affidavits were used in thousands of Ally foreclosures, and the properties involved were subsequently bought and sold. The previous homeowners can now sue the banks that foreclosed, and the “they were underwater anyway” argument isn’t holding up in many states, where both civil and criminal penalties are being discussed. By admitting his actions
, Stephans instantly invalidated all of the repossessions and sales that were based on those actions. And Stephans said his practices are common in the industry. They’re so common, in fact, that a term was developed to describe them: “robo-signing.” This is being performed at law firms that process thousands of documents a day, which have become known as “foreclosure mills.”

Tammie Lou Kapusta, a former paralegal for one of those mills, testified on September 22nd that she was instructed by the attorneys at the firm to officially notarize hundreds of documents a day with a notary stamp that she wasn’t legally allowed to use. When complaints started rolling in about stamp dates that didn’t match other dates within the documents, she and all of the other paralegals doing the same thing at the firm were instructed to make the date of the stamp match the other dates, no matter what day it actually was. The documents would then be signed with the name “Cheryl Samons” by three different people, only one of whom was actually named Cheryl Samons. Kapusta said she drew the line when she was instructed to use random Social Security numbers assigned to people who might not even exist in order to falsify documents regarding each hypothetical person’s military status.

At least she drew it somewhere. She told the court that others didn’t.

The fact that there has been fraud and theft on a massive scale, sometimes by organisations long gone, that's been ... ignored. The Dishonesty has been so universal that we can't do anything else without rocking the boat till it capsizes.

Again, see Laws, and Little People.

What this means is that few titles that have changed hands in the last decade are unimpeachable. Even those who bought for cash may not be able to prove ownership, so cannot sell, not for any price. Unemployment is now close to 10%, and the traditional remedy for that, moving to where the jobs are, that's not always, or even usually, available now. People can't sell their homes, or if they can, may not be able to buy any of the millions of foreclosed homes now standing empty, because no-one can be sure who legally owns them.

And that, ladies and gentlemen, is why the Australian dollar is now worth more than the US dollar. Why those in the US real estate market are selling for any price they can get, and why gold is going up and up and up. Because it's not just the Real Estate market. It's the attitude that if a corporation is large enough, it is effectively beyond the law. Judges can be bought, and Congresscritters rented, quite cheaply. The system worked while the illusion was kept up, but now the rubes are starting to get wise.

The US economy has so much inherent strength that it will survive even this. But we may see the days of million dollar bills being insufficient to buy a cup of coffee first.

See Quantitative Easing.