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posted by Adam Levitin
My post on allonges generated quite a bit of response, on and off the blog. But here's what's troubling me--if allonges are being fabricated ex post, who is doing it? • The servicer? • The default management shop (e.g., LPS)? • The network firm (sort of the foreclosure GC)? • Local counsel? I'm curious to hear any insights anyone has on where the document production is taking place. I'm also curious to hear insights on whether the production of allonges is because they simply do not exist or because they are being held by document custodians and for whatever reason (cost, trust) they aren't getting down to local counsel. In other words, is this outright fabrication or simply recreating documents that actually exist somewhere but aren't moving down to local counsel? June 19, 2011 at 9:31 AM in Mortgage Debt & Home Equity
Professor, a recent endeavor has provided me with access to securitization document files. I'm finding within those files that several "key" documents appear to have been "created in anticipation of future events". To date, I've reviewed approximately 50 files with mortgages going back as far as 2003 and I believe that every one of them contained either unnecessary separate page allonges or en blanc assignment stamps with "ink stamp" signatures as opposed to actual hand written signatures. And literally NONE, as in ZERO, of these documents provided any date as to when they were actually created. These files are an absolute MESS, btw, with as many as 8 copies of notes and/or mortgages in them among other information. It really is little wonder how/why original docs are being lost. In addition to these documents, I am also beginning to find undated, blank assignments of mortgage with the apparently appropriate individual's name and signature in place, and specific printed witness names in place with lines for signatures - but no signatures. Bottom line, I believe, is that these documents were created in anticipation of being used at some point in a loan's history and they may be brought out if/when necessary. If they aren't being produced it may be b/c they have been "misplaced". Not unlike the fraudulent AOMs being created and filed days or weeks before a foreclosure action in the hope of "proving" to a court that a note had been securitized 2,3,5 years earlier - as I've been watching Fannie Mae and others do for over a year now... Posted by: Mike Dillon | June 19, 2011 at 10:11 AM One way to get to the bottom of fabricated allonges is to conduct depositions of the key players prosecuting foreclosure actions. Counsel for the foreclosing entity will argue that they (servicer, LPS, network attorney) are not parties to the action and, as non-party witnesses, they have no duty to comply with discovery demands. This argument completely ignores the fact that by creating documents (allonges, endorsements, assignnments) they have made themselves witnesses in the
foreclosure action and blurred the distinction between client bringing the foreclosure action and counsel shepherding it through the legal system. As voluntary witnesses they are fair game for depositions. One hopes that the courts will deny motions to quash and order that key players to give deposition testimony. Perhaps then we will learn where the allonge factory is located. Posted by: ploughman | June 19, 2011 at 10:22 AM Although I do not know with complete certainty who drafts these documents, the documents themselves suggest that it is the network firm/local counsel (at least in Wyoming). As a bankruptcy attorney, I see numerous motions for stay relief. I have noticed a pattern. The assignments of mortgages all look the same (format, font, wording, etc.). The allonges all look the same. The assignments say "Return to: [Network Firm]." Thus, I assume the Network Firm drafted the document. I use "Network Firm" to avoid any sort of negative connotation that this post may have towards the actual firm. I must also assume the allonge was drafted by the same Network Firm considering the resemblance of all the allonges. This makes sense considering it is the Network Firm that wants to ensure the motion is filed by what looks to be the proper party. To clarify, in Wyoming 90% of these motions are filed by the same firm. If the party isn't the mortgagee of record, draft a mortgage assignment. If the note is still payable to the original lender, draft an allonge to make the note bearer paper. It sure is simple to create the facade in the public record in order to institute foreclosure proceedings (because we all know the debt obligation is not listed as an asset on the balance sheet of the servicer, i.e., the loan is owned by someone else). I have great trust in all members of the Wyoming Bar. Thus, I assume that while the documents are drafted by the same firm, the documents are signed by the appropriate individuals. Posted by: Brad Hunsicker | June 19, 2011 at 01:22 PM Adam: Each of the prior responses gives you some good indication as to the answers to your question. And the answer is really very, very simple. Brad Hunsicker's observation is DEAD ON. One CAN ascertain the origin of both the assignment forgeries AND the allonge forgeries through pattern analysis. IF the institutional trust was engaged in the forgery, one might expect to find commonalities for each trustee. Leaving aside the fact that the trust isn't really involved in the mortgage borrower side, I can assure you that this is NOT the case. IF the foregeries were by the institutional custodian, one would expect commonalities by institutional custodian. This is also NOT the case. The institutional custody business is actually VERY disciplined and squeeky clean. The commonalities mostly appear amongst similar assignments and allonges pled by a particular foreclosure mill law firms. In a few cases, the servicer is directly perpetrating the forgeries. There are a few contract forgery mills which churned out distinctive assignments FOR THAT MILL, which were somewhat independent of the law firm. But this is really a subcategory of servicer commonality, that is the commonality in forgery perpetrated by the contract forger employed by the foreclosure contractor OR the servicer.
Again, this can be seen by the PATTERN. In the case of assignments, some jurisdictions even REQUIRE that the preparer be identified. So the forged assignment actually STATES on its face that it was created by either the foreclosure mill law firm OR the servicer. By contrast the REAL indorsements and REAL assignments also have a distinctive appearance. These bear unmistakable commonalities. These were created by the loan originators, usually within about two weeks of origination. Moreover, you and the others involved really have failed to perceive the obvious because you are too focused on listening to the likes of Yves Smith, who has no idea whatsoever what she is talking about. The originating Lender typically loses control of the promissory note within about 72 hours of loan closing. This is because even the very largest mortgage lenders are lending borrowed money. The money is borrowered from a warehousing lender and the note is security for the loan. So the note is ALWAYS immediately indorsed in blank and sent to the institutional custodian! The originating lender continues to OWN the loan, but the warehousing lender is the holder. Thereafter, when the loan is sold into secuirtization, the warehousing lender is PAID and the collateral (promissory note) is released for delivery to the Sponsor, Depositor and then the trust. THE SERVICER NEVER HAS CUSTODY OF THE NOTE AFTER ABOUT DAY 3. As I said in my comment to your prior post, there is NOT a systemic problem in securitization. You are barking up the WRONG TREE. The patterns are ABSOLUTELY CLEAR, UNMISTAKABLE AND PLAIN AS DAY. The role of the default management shop is ALSO misunderstood, because folks just are NOT PAYING ATTENTION and haven't systematically examined the evidence. The default management shop ORCHESTRATED both the foreclosure and the fraud, but through control of the foreclosure mill law firm. PRIOR TO July 2008, the default management shop executed the robo-forged affidavits prepared by the law firm, as well as executing the robo-perjured assignments. When an indorsement was perceived to be missing, an allonge was also forged. ANY OTHER DOCUMENT THAT WAS NEEDED IN SUPPORT OF THE FORECLOSURE WAS SIMPLY FABRICATED. This was KNOWN as a consequence of In Re Hill. If you are at all confused about this, get in touch with me. After the discovery of Dory Goebel's perjury in the In Re Wilson case, LPS CHANGED its business process, pushing the execution of the perjured affidavits and the forged allonges back to the servicer. This was the origin of most of the servicer robosigning as it came to be discovered. But this was NOT the model that was used PRIOR to Dory Goebel's perjury. Primarily for two select customers who were struggling with recent acquisitions, LPS pushed affidavit forgery to its DOCX subsidiary. These are KNOWN FACTS. They can be demonstrated with reference to the public record. This is a criminal, NOT a civil matter. But the Justice Department has continued to coddle the banks and treat this as a civil matter. The answers to these questions are readily apparent by a simple examination of public records! This is how I DISOVERED THE FRAUD IN 2007. And I reported this to both newspapers and the Justice Department. *
Mike Dillon mentions going to the loan files to look. That is the WRONG PLACE to look. Bank supervisors, regulators, and auditors OUGHT TO HAVE BEEN CHECKING THE COLLATERAL FILES within the custody of the institutional custodian and spot checking these against the documents filed in foreclosure cases. This is a simple audit technique. Comparison of the documents in the collateral files with the documents recorded in public records and filed in foreclosure and bankruptcy cases not only proves the FACT of these forgeries, but also PROVES the criminal intent. As I said in my prior post, there is NOT a systemic problem with the securitization. The fraud is in the foreclosures. Documents were simply forged to order. * One really wouldn't need to conduct depostions of the bank employees. There is AMPLE evidence to MAKE ARRESTS for the flagrant criminality. And if the FBI simply went around and ARRESTED the DOCX employees, these folks would give up their supervisors at LPS in a heartbeat. Moreover, by gathering up the robo-perjurers and robo-forgers, who were cranking out 1,000 perjuries and forgeries a DAY, these folks would flip on the lawyers and executives faster than you could ever imagine. The ONLY reason that this fraud continued for YEARS after it was first discovered and reported was an UNWILLINGNESS to treat clear and unmistakable criminality as a CRIMINAL rather than a CIVIL matter. Feel free to e-mail me if you are really ignorant of these facts and need any details! William A. Roper, Jr. firstname.lastname@example.org Posted by: William Roper | June 19, 2011 at 03:52 PM Adam: I also want to clarify one other point in my post above. When I stated: "This is how I DISOVERED THE FRAUD IN 2007. And I reported this to both newspapers and the Justice Department." I did NOT mean to suggest that the discovery of this systemic fraud was original to me. Others, including the first commentator above, Mike Dillon, seemed to be well aware of the nature of fraud systemic fraud in mortgage servicing and foreclosure when I first became acquainted with it in 2007. Nye LaValle was another pioneer. And I KNOW for a fact that Nye was communicating widely with anyone in authority who would listen (as well as those who refused to listen) well before I reached my independent conclusions. My background as a former mortgage professional gave me a different insight and take on the problem. And I viewed many of the claims others made during our early acquaintance with great skepticism, just as you have expressed skepticism at the possiblity of allonge forgeries. But I was not persuaded by Mike and Nye's arguments and assertions. Rather, I was persuaded by my own independent and existensive examination of primary public records from county recorders, PACER Federal Bankruptcy and U.S. District Court dockets and state court filings. I was persuaded by the records filed in hundreds and hundreds of cases. As my study continued, the hundreds of examples expanded into thousands. When you look at that evidence, the patterns are absolutely clear and stark. There is NO DOUBT. The evidence is absolutely conclusive. Mike and Nye and others saw aspects of the fraud well before I was ever aware of it. So please understand that I am NOT asserting that my discovery was original. Rather, my finding was that the fraud could be easily demostrated from public records without necessity for discovery or cooperating witnesses at all.
The challenge was that the scale of the fraud was so sweeping and epic, involving essentially every major financial institution in the country as to be seemingly unbelievable. With a suspension of disbelief, all that one has to do is go and draw a sample. Examine the sample. When essentially ALL of the records pulled from ANY sample exhibit fraud, the conclusion is obvious. To a certain extent, this is what Abigail Field recently did with her examination of notes pled into evidence. But she drew incorrect conclusions from her data. Try the exercise yourself. Pull a random sample of twenty five or assignments or the notes pled in judicial foreclosures in essentially ANY jurisdiction. Look them over carefully. If you need help, ask. Every sample will show extensive fraudulent activity. Then go check with a good Georgetown statistics professor and ask him the probability that this is a chance outcome. Try the experiment again with a larger sample. ALL OF THE PRIMARY EVIDENCE SHOWS THE MISCHIEF! So which are you going to believe? The paid spin meisters and apologists at the banks, who have been LYING throughout? Or will you believe that data? Posted by: William Roper | June 19, 2011 at 07:06 PM @William A Roper June 19, 2011 at 03:52 PM Just to clarify, Bill, I'm merely stating what I am seeing in the securitization files as I'm digging through them as a result of this opportunity. And, until recently, I haven't seen a FC defense case get this level of data in any discovery. And I agree that the AOMs are fabricated. I've seen the blank AOMs signed, notarized and ready to be filled in with the appropriate information if/when a foreclosure needs to be conducted - as opposed to the AOM being created when the actual securitization of the note in question supposedly took place. I'm not 100% ready to go along with your statement that these things were properly securitized from the beginning, though. One reason being that I have not seen many AOMs that have passed through the depositors for the trusts as opposed to being sold directly into the trust - that whole A to D vs. A-B-C-D argument. Another being that, if you follow the chain according to the AOM, many, many of these notes surpass even the common two year window of substitution into a trust. Obviously, there may be room for argument in there but when you combine an undated en blanc assignment of note with a fabricated assignment of MORTGAGE whose creation date is totally out of whack with the rest of the time line, then that just creates more questions for me and gives me fewer answers. Posted by: Mike Dillon | June 19, 2011 at 09:42 PM @Mike Dillon: Mike I did not mean to demean or disparage your efforts. I realize that you do NOT have access to the vaults of the institutional custodians. And you are no doubt making a thorough study of the data actually available. My post was to point out to Adam that the regulators and auditors DO have an ability to access the custodial files within the custody of the institutional custodians and that examination of these files and COMPARISON with the documents actually being filed in foreclosure cases OUGHT TO HAVE BEEN part of any regular audit procedure by either independent auditors OR regulators as they studied and tested the internal control environment. Had these test been done, the fraud would have
certainly been discovered in its infancy instead of after more than $1 trillion in questionable foreclosures. Posted by: William Roper | June 20, 2011 at 01:49 AM Thank you for the post, very good work. We are seeing more and more of these undated allonges appearing. Some have different notes attached with forged signatures of borrowers; those are the easy ones. However, some of the allonges, even after some cursory Googling, appear legit. The individuals who "executed" the allonges appear to actually have worked at the originator during the relevant time periods when the note would have first been sold. However, we have never tried to compare signature samples of the "executors" who worked for the originator; Mike Dillon may be correct in his estimation that many of these endorsements were done but left unsigned, and then were later forged by parties seeking to enforce the mortgage. And dare I say, this blog is much better served by posts like this rather than posts ridiculing people who think the government's role in the mortgage industry has expanded well beyond reasonable levels. Posted by: oyez | June 20, 2011 at 09:20 AM Professor Levitin, I've examined about 150 assignments by allonge in NYC in the course of client intake as a foreclosure defense attorney. Most were recorded and are available online from the office of the City Register, some were attached to foreclosure complaints or produced later in the proceedings. At least 80% of these assignments were executed by employees of default managers, document mills, or servicers. Most often, the default managers seem to be calling the shots, such as when an assignment executed by a servicer is marked "return to" the attention of local counsel, who get their marching orders from default managers. In another 10% or so, local counsel executed assignments as MERS VP's apparently at the instruction of the default manager. The remaining 10% or less were executed at or near origination (pre 2002) by an employee of the originator or servicer or were later generated by the servicer with actual authority thru a power of attorney. Overall, 60% of assignments were executed by MERS as nominee for the assignor. Posted by: Catherine Isobe | June 21, 2011 at 07:35 AM Professor - your question "But here's what's troubling me--if allonges are being fabricated ex post, who is doing it?" I would suggest that by applying the maxim of lex parsimoniae, the answer turns out to be anyone with motive, opportunity and little or no risk of punishment. The motive is expedience; the opportunity is enhanced with today's technology and even now, it appears there is little risk of punishment. Posted by: Judge Roy Bean | June 22, 2011 at 01:46 PM
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