A Sweatshop of Mortgage Fraud
Board: Macro Economics
If you ever had any doubt that the securitization and real estate boom in the last ten years was anything other than a carefully designed, wholesale fraud and criminal conspiracy involving nearly every big bank in the country, the 60 Minutes story that aired April 3, 2011 called "The Next Housing Shock?" should finally dispel those thoughts.
The story outlined the experience of one woman's foreclosure by a bank which first claimed in court it lost key documents showing the transfer of her mortgage from its originator to the current bank, then -- after she demanded they produce additional documentation -- submitted documents to a court claiming it now FOUND the documents.
One small problem. The dates shown on the documents claimed the mortgage was transferred several MONTHS after the bank had originally initiated foreclosure. If taken literally, the bank was retroactively stating it had filed for foreclosure on a mortgage it had not yet purchased.
One much bigger problem. The woman involved with the foreclosure is an expert in handwriting and document forgery. After battling her case, she obtained copies of thousands of other documents submitted to courts for foreclosure motions and found something odd. Hundreds of documents filed by dozens of different banks all involved the signature of Linda Green, VP of (whatever bank). Sure, Linda Green might be a common name but the signatures were identical.
The forged documents were traced to employees working for a firm named Docx located in a strip mall in Alpharetta, GA. That firm was owned in turn by a firm named Lending Processing Services (LPS) which provided mortgage processing services to many big banks, including BOA, Wells Fargo, HSBC, Deutsche Bank, Citibank and others. Interviews with employees of Docx show it hired employees as far back as 2004 who had ZERO training in banking, finance, paralegal work or any skill remotely related to lending or handling of legal documents. One employee stated workers were expected to "process" roughly 350 documents PER HOUR. There were also MULTIPLE employees all signing documents as "Linda Green". Why? Cuz it was easy to spell and didn't take long to physically write.
The Docx story is not unique. The book All The Devils are Here provides several other identical examples with document fraud by mortgage originators and processors.
How bad might the problem be?
The story included a short interview with FDIC chair Sheila Bair who essentially called for the creation of a Financial Superfund to be paid for by contributions from banks to cover what might be tens of billions in costs associated with untangling or simply moving beyond the current mountain of indecipherable paper work behind the millions of bad mortgages.
If such a fund gets established, maybe they should hang a sign at the city limits of Alpharetta, Georgia. Welcome to Alpharetta, Georgia. The Love Canal of the Financial Crisis.
#1) 60 Minutes Story