On top of it all, there are companies which provide banks with the convenient ability to purchase “recovered documents” to replace papers that are “missing.” (Of course there are.) Until 2009, a company called DOCX was one of these providers. What super-sleuthing ability allowed DOCX to “find” those papers? The ability to make them up, which DOCX openly advertised. Then banks used—and still use—them in court. Supposedly, DOCX only created papers when the facts behind those papers were correct according to electronic records. In reality, those electronic records are very, very flawed, and are now causing major confusion for banks that think they own mortgages which are actually owned by other banks, or sometimes not owned by any of them.
In August, the Shapiro & Fishman law firm had to file a second set of mortgage papers in a foreclosure case because the original DOCX papers had been proven to be fraudulent. Got that? Two different sets of papers regarding the same mortgage. DOCX was forced to stop providing its “services” in the face of growing complaints about the fact that the documents it was preparing were about as legitimate as Monopoly money. And which bank has been sued for using documents “found” by DOCX? Deutsche. Naturally.
One thing DOCX apparently didn’t do is file affidavits of lost summons. Those are legal claims that a defendant was informed of a case with a court summons that was supposed to be kept on file but was instead mysteriously lost. On Friday, 4closurefraud.org reported that Legalwise, Inc. had pulled a report on how many of these affidavits are being filed on behalf of banks. The site then posted a list of some of the affidavits of lost summons that have been filed in the past year alone; not the text of the affidavits themselves, just the identifying serial number and three names connected to the case. When copied and pasted into a word processing program, the list is 271 pages long. Many of the names of the defendants are either blank or John/Jane Doe, which could make one wonder exactly how the process servers figured out who to tell about the impending trial. Yves Smith, a well-known economics writer, reports that the entire list is from just one state—and from just one county within that state. If the process server signs an affidavit “confirming” that the summons was delivered and subsequently lost, then there’s no way to tell who was actually served until courts call into question all process server affidavits. An untold number of homeowners are missing their foreclosure proceedings, just like Patrick Jeffs did, because they’re never even told about them.
The first thing that’s insidious about the banking reaction to all of this is the timing. A Bank of America executive told a Massachusetts court in February that the practice of not examining mortgages intended for foreclosure is common. She added that she signed thousands of statements “confirming” examination of documents used to foreclose every month, and that she “typically doesn’t read them.” When did Bank of America begin to halt some of its foreclosures? Less than two weeks ago. That’s not a sign that Bank of America didn’t know what it was doing. It’s a sign that Bank of America thought it could get away with what it was doing.
Still, that’s not what’s most insidious about the reaction. What’s most insidious is where the foreclosure freezes are taking place. Many banks have only ordered foreclosures to cease in 23 states. Why 23? Because there are 23 states that require courts to review foreclosures. And every single one of those states is on the list.
The banks in question have been trying to claim that they only chose to stop most foreclosure activity in the 23 judicial review states because they think the problem is almost entirely contained within the robo-signing of the court documents needed to foreclose. That’s a bit strange, because Yves Smith writes that North Carolina lawyer Max Gardner has a running joke that when a group of over 100 lawyers he works with find a mortgage with proper documentation, the papers should be bronzed and hung on the wall—and North Carolina isn’t a judicial review state.
To be more specific, a mortgage has two basic components. One is the deed of trust attached to the property itself, and the other, called a note, is the homeowner’s IOU. Gardner’s lawyers have yet to find a single note that correctly documents the path the IOU has taken to arrive at the bank trying to foreclose. The notes were the things getting robo-signed during the housing bubble, not by foreclosure mills but by mortgage mills. And the signing was even more robotic because it could be done electronically through a system called Mortgage Electronic Registration Systems (MERS). When a note was sold into the system, “ownership” of the note could be traded via computer. Unfortunately for MERS, the law requires the physical note to prove ownership, so none of these trades were exactly what one might call legal, or even what one might call real. Hence the need for operations like DOCX, to fill in the missing paperwork.