Ann Woolner - Bloomberg

Man Who Had No Mortgage Faced Foreclosure Anyway: Ann Woolner - Bloomberg 25/10/10 12:51 PM
Man Who Had No Mortgage Faced

Foreclosure Anyway: Ann Woolner
By Ann Woolner - Oct 7, 2010
Bloomberg Opinion
Jason Grodensky paid cash for a South Florida home last December.
With no mortgage and full ownership, he had no fear of foreclosure.
And yet, Bank of America foreclosed on the house seven months

later, according to the South Florida Sun Sentinel. The court-ordered
foreclosure took place July 15.
Grodensky tried for months to get answers from the lawyers and
lenders involved. He got nowhere until he contacted the newspaper
which started poking around. Now, Bank of America says it will
straighten out the mess at its own cost, the Sun Sentinel reports.
Banks that are suspending foreclosures in much of the country call

mistakes in paperwork mere technical errors. This implies that the
foreclosures, or most of them, were otherwise on solid legal ground
and that any mistakes were the unintended result of trying to handle
too many cases in too little time.
http://www.bloomberg.com/news/print/2010-10-08/man-who-had-no-mortgage-faced-foreclosure-anyway-ann-woolner.html Page 1 of 5
No harm. No foul, right?
Not true. A great deal of harm has been inflicted, and not just on the
rare homeowner wrongly judged to be delinquent.
What’s happened over the past few years is that the very system of
keeping track of who owns what property in the U.S. has been
undermined by banks too busy to bother with doing it correctly.
This bad record-keeping became an enormous problem for banks

when the housing market collapsed and borrowers defaulted. Missing
the proper paperwork, foreclosure mills turned out documents
misidentifying mortgage holders and containing multiple errors and
omissions.
Breakdowns
Signing hundreds of documents a day, bank personnel never checked

for accuracy but said they did, sometimes forging other people’s
signatures. Notary publics lied about witnessing those signatures and
judges with civil dockets bulging with foreclosure cases didn’t inspect
the papers before granting the foreclosures in a matter of seconds.
Why worry? Typically, the borrower was a no-show, anyway.
(And that’s in the states that offer some judicial protection to the
borrower before their homes are taken away. In the rest of the
country, no court even pretends to scrutinize documents before
foreclosures.)
If judges had taken a closer look, they probably would have seen what
Judge Arthur M. Schack in Brooklyn found when he actually read the
foreclosure papers filed with his court.
In one case, for example, Deutsche Bank National Trust Co. filed to
foreclose even though it had no legal right to do so, having already
sold the mortgage to Goldman Sachs, the judge pointed out in an
order.
Absent Witness
Besides, one of the people signing the documents did so as vice

president at two different firms. If he had somehow managed to
change jobs on that day, Schack said, it would have been a conflict of
interest for him to sign in both capacities.
In 46 out of 104 foreclosure motions Schack decided over a two-year

span ending last year, the documents were so full of error that he
refused to approve the foreclosures, the New York Times reported.
As to how many foreclosures he rejects that return later in good form

and get approved, “I don’t keep score,” Schack said yesterday in a
telephone interview.
“Some do come back and do clean up the paper work,” he said.

“Others are out there suspended in limbo land.”
Skipping Step
It’s come to this because banks took a giant record- keeping shortcut
to feed the insatiable hunger for securities backed by mortgages.
They were too busy to do what had been done throughout U.S.
history: record in a public deed room at the county courthouse each
time a piece of property changed hands and each time a lien was
filed.
How archaic that whole county courthouse thing seems, when you
can digitize the information and never leave your chair.
That’s what banks did in 1997. They created the Mortgage Electronic
Registration System, which computerized, centralized and privatized
deed records on some 60 million mortgages. The industry saved an
estimated $1 billion in fees over the next decade.
“They simply dispensed with the recording system and have

transferred what appears to look like trillions of dollars of real
property without recording them,” says U.S. Representative Alan
Grayson, a Florida Democrat who’s been digging into the issue.
He points out that this deprived local governments of tax revenue

from the transfers.
It also deprives the public of accurate, accessible records of property

ownership.
Grodensky’s Problem
While deed records were handed off to the electronic registration

system, the borrower’s note promising to pay was sent on a circuitous

route from loan originator to other mortgage firms and banks until it
was pooled with other mortgages into trusts underwritten by banks
and sold to investors.
For Jason Grodensky, the problem was that foreclosure proceedings

that began before he bought the house in a short sale continued after
he got ownership.
His case is probably rare. But the mortgage industry’s cavalier

attitude toward rules and record-keeping is too common, too
systemic, too long-running and too damaging to be sure of that. And
in any case, it can’t be called mere technical error.
(Ann Woolner is a Bloomberg News columnist. The opinions

expressed are her own.)
To contact the writer of this column: Ann Woolner in Atlanta at

awoolner@bloomberg.net
To contact the editor responsible for this column: James Greiff at

jgreiff@bloomberg.net
®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

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Man Who Had No Mortgage Faced Foreclosure Anyway: Ann Woolner - Bloomberg 25/10/10 12:51 PM

Man Who Had No Mortgage Faced

And yet, Bank of America foreclosed on the house seven months

Banks that are suspending foreclosures in much of the country call

No harm. No foul, right?

This bad record-keeping became an enormous problem for banks

Signing hundreds of documents a day, bank personnel never checked

Why worry? Typically, the borrower was a no-show, anyway.

Besides, one of the people signing the documents did so as vice

In 46 out of 104 foreclosure motions Schack decided over a two-year

As to how many foreclosures he rejects that return later in good form

“Some do come back and do clean up the paper work,” he said.

“They simply dispensed with the recording system and have

He points out that this deprived local governments of tax revenue

It also deprives the public of accurate, accessible records of property

While deed records were handed off to the electronic registration

system, the borrower’s note promising to pay was sent on a circuitous

For Jason Grodensky, the problem was that foreclosure proceedings

His case is probably rare. But the mortgage industry’s cavalier

(Ann Woolner is a Bloomberg News columnist. The opinions

To contact the writer of this column: Ann Woolner in Atlanta at

To contact the editor responsible for this column: James Greiff at

®2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.

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