If you have "no place to go," come here!

NJ Judge Threatens to Close Down Big Banks over Fraudclosure

Valhalla's picture

via madamab over at her place.

NJ state Supreme Court Chief Justice Stuart Rabner has ordered 6 banks to demonstrate why the state shouldn't shut down their operations in NJ in Jan:

Six lenders who have combined to file nearly 30,000 foreclosure actions in New Jersey this year face the possible suspension of their operations next month under a court order announced Monday by state Supreme Court Chief Justice Stuart Rabner.

The action follows a report submitted to the Supreme Court that, citing depositions and court filings in other states, paints a picture of systemic abuses in the filing of foreclosures that include so-called "robo-signing," in which employees signed hundreds of documents without checking them for accuracy.

The 6 banks were chosen because of the high volume of foreclosure actions brought by them. Twenty-four other banks are required to submit docs to a special master (sort of an ad hoc judge) showing that "there are no irregularities in their handling of foreclosure proceedings."

Chief Judge Rabner was apparently prompted to this action based on a report submitted to the court detailing bankster abuses:

In one instance cited in an administrative order, an employee of OneWest Bank, formerly IndyMac Federal Bank, said in a deposition that she signed 750 documents a week, taking no more than 30 seconds per document and relying on others to check the documents' accuracy prior to signing.

Employees testifying in other depositions said they were authorized to sign documents despite having no background in the mortgage industry and little or no understanding of what they were signing.

I don't know anything about Rabner, but:

More problematic, [Rabner] said, is that 94 percent of the foreclosures have been uncontested, often due to homeowners' inability to afford legal counsel.

It's been so long since I've heard anyone in government show any concern for the rest of us, I forgot what it sounds like. And I hate to get my hopes up, but if even one big bank gets closed down in just one state...

No votes yet


Submitted by lambert on

What the article doesn't say is that robosigning is fraud. See this lucid explanation from Barry Ritholz:

It is impossible to perform that many foreclosure reviews and data verifications in a single day. The only way this could happen is via a systemic banking fraud that orders its employees to violate the law.

Judges tend to frown on that kind of thing. But read the whole Rithholz article to get a sense of the sheer immensity of the thing.

On popular movement, see, and see Yves generally, because she's been a key driver; although Atrios has been good on HAMP, Yves has been great on the larger picture and the detail.

Exposing fraud is also the sort of thing the blogging platform helps with. I don't know how it got sparked, but I'm guessing Marcy Kaptur's "Show Me the Note" (2009) concept was early, though I don't know what sparked her. (And too bad Kaptur is pro-life).

What's new in this is the Judge openly threatening the banks. I wouldn't advise any travel in small planes for the guy.

Valhalla's picture
Submitted by Valhalla on

the hope is for it to become a movement among courts to threaten the banks. Although the links are great, of course. Since it's clear Obama and Congress aren't going to do anything, the courts are the last resort. At least until various legislatures pass retroactive immunity.

twig's picture
Submitted by twig on

that's precisely what I meant. It just didn't come out as well as yours!

twig's picture
Submitted by twig on

and I didn't word that comment very well. I was just hoping that more and more judges would refuse to go along with these criminals, and maybe there could be a national moratorium.

The really sad thing about this is that it looks like some of the people who are in foreclosure don't know that there's growing resistance or that there are things they can do to fight back. A friend of mine is actually in that situation, and she had no idea there were resources available that could be helpful. And she was a realtor until the market collapsed!

Submitted by lambert on

... to an actual "grass roots" effort here. For example, Kaptur's "Show me the note" concept is from 2009 (this being almost 2011), and Kaptur surely was reacting to action in her district, which implies that there'd been real effort before that; talking points like "Show me the note" don't evolve out of nothing. (I have a mental picture that OH was one of the epicenters of the foreclosure crisis, but I could be wrong. Maybe Kaptur was a more active listener to her constituents than most.)

So, the foreclosure thing has been building for years and -- quelle surprise! -- without coverage in our famously free press until recently. So it's wonderful that there are some honest judges who get this, but they're not the drivers. People like us are the drivers, and using tools like we use.

Worse, so many of these stories are stovepiped, so "the rest of us" become aware of these efforts only when they reach top level news distribution hubs and propagate downward (think of PA_lady and the Marcellus Shale. For states that have extractive economies, that's huge. But nobody knows. Which is why your friend was isolated and unknowing; not a bug, a feature).

So that's why I reacted strongly to the word "movement." I think of what the honest judges are doing more as an outcome of a movement than a movement per se. Let's give people like us some credit, eh?

Valhalla's picture
Submitted by Valhalla on

I'm not so crazy about "outcomes." In one sense the NJ Supreme Court is just doing its job, but in another they could be fellow travelers. Outcome implies that the court wouldn't have done anything without the movement(s). Maybe they wouldn't, or maybe they needed help, but we don't know that.

Anyway, it occurred to me it might be helpful to get a copy of the report mentioned in the article.

Legal Services of New Jersey Report and Recommendations to the New Jersey Supreme Court concerning False Statements and Swearing in Foreclosure Proceedings, November 4th, 2010

RL calls today but it looks like there's lots of good stuff, including exhibits from bank employees.

Submitted by lambert on

... as opposed to across to your neighbors, when searching for causality, that is, of course, up to you.

I agree it's not provable; I haven't done that work. There's plenty of suggestive information, though, starting with the timeline. I mean, the cases had to be brought before the courts, before the judges could do what they're doing. Who did that? Or did the judges somehow find the cases under a cabbage leaf?

Valhalla's picture
Submitted by Valhalla on

(and it never was -- neither twig nor I were in any way denigrating the mighty work of "the rest of us" on the foreclosures).

If anything significant comes of this, then courts/a court is doing its part, eh? Amidst the FAIL of other Versailles factions. Don't we want to encourage that? Maybe encourage other states' courts to do the same? Perhaps a shoutout to Legal Services of NJ to encourage other state legal services to serve up similar fare to their court systems?*

Everyone has a part they could play. Political and econ bloggers can get the word out and break down the silos on this information, and hammer at the causes and propose solutions great and small. But they can't actually stop foreclosures or even slow them down in any particular instance. On the other hand, courts can't do that sort of education and activism, but they can stop stuff. It sure sounds like having those two things working in tandem would be a good thing. Let's not fight over pieces of the who-gets-credit pie, let's bake a bigger pie.

There's fail all over the place, from the career progressives who cheer on an administration colluding with banksters and pushing tropes about "deservedness" to the banksters themselves, who have come away from the global meltdown they caused having learned only that next time they need to dream even bigger frauds. There's not enough cramdown in the world for them. And yes, I'm not telling you anything you don't already know.

But do you really want to spar over this?

* I'm in RL for the next few days but I hope to dig around when I get back to see what else is happening.

Valhalla's picture
Submitted by Valhalla on

documents the abuses -- which I thought would be great fodder for anyone wanting to show a pattern of systemic abuses by banks. Real life details, already collected in one place.

Ok, now I'm super-late for RL and am going to catch heck for it. Catch you all in a few days, hope your year ends better than it began!

Submitted by lambert on

(That's why the moderation rules are, among other things, how to have productive conflict.)

Sometimes that's what it takes to elicit comments like the one you just made, which would not be present had I not added the links that I did (especially useful to new readers).

I'm not talking zero sum at all. And while I accept (paraphrasing) that "everybody has a role to play" I'm concerned with issues of agency.

It wasn't easy to get those cases before the courts, and the people who did that are the active agents in this process. Good for the honest judges, and thank The God(ess)(e)(s) Of Your Choice, If Any, that the exist. Good if what this judge does propagates. Let's just give consideration to the possibility that there are larger social forces at play, prior to and driving the judgements, and creating the context for them. Generally these are exactly the voices that are erased from the news, and from history.

Submitted by Fran on

I have been working on this for a case, and I have found a lot of this material in my searching. It is nice to have it all in one place!! It was a slow process for me.

A lot of LPS paperwork is done by NDEx in Texas. We have been able to show that the signatures on key documents are forgeries because the Notaries have their signatures on file with the state. Turns out, NDEx had a lot of their employees sign up to be Notaries! We are now requesting their log books. These are the kinds of details that have to be teased out to build the case.

Most of the depositions that have blown things open have been in the course of homeowners bringing a case against the bank. Gradually these have been building on each other, so eventually it all takes on a larger momentum. Thank goodness for the internet!!

Submitted by lambert on

See Yves (who has been a driver in the econoblogger world on this). And doesn't have anything either.

My first thought was that Docx and Ndex were both tentacles of LPS, but Ndex is a subsidiary of Dolan Media Company,

What I'm getting to is that your work definitely worth a post, or links to the filings where you show this. If there are two of these guys with identical business processes, it makes it much harder to make the "bad apples" argument.

Submitted by Fran on

foreclosure mill law firms - similar to the Stern Group in Florida (which has been sanctioned), where it broke open first. One reason, I think, it is slower to surface with NDEx is that most of their cases are for CA, even though they are in TX. CA is a non-judicial state - the paperwork does not get seen by anybody. The states where banks stopped foreclosure actions were judicial states - about half (23) because the foreclosure goes before a judge. In those states, some judges began to notice irregularities.

There is testimony on 4closeurefraud from officers of LPS. LPS, although they try to deny it, contracted with law firms. They are actually being brought up for illegal fee splitting. LPS rated the firms (which they do admit) on how fast they were, and gave them more work accordingly.

NDEx has managed to stay in the shadows. They have to produce the Notary log books. You never know quite what will break things open.

Submitted by Fran on

was not just to save costs. On the surface they were just outsourcing the paperwork and mailing, etc. But, they were adding another administrative layer. I think they may have done it for reasons of deniability.

Another thing that makes in difficult in LA County, CA, is that you cannot access records online. You have to actually go to the Recorder's Office. In Florida, you can access records online and you can compare cases and therefore signatures - and see patterns.

Submitted by lambert on

E.g. I don't know your jurisdiction, of course.

That, and if the electronic record can't be traced back to the physical record, it's possible to sell the same record over and over again. Fraud!

Submitted by Fran on

It was my own thought, and I do try to qualify anything I say - either it is my own thought or I cite a source.

There is so much happening every day that it is a job just to try to stay on top of what is coming out. Right now, for us, it is a race against the clock. Eventually this is going to turn, but in the meantime millions of people have and will lose their homes unnecessarily.

What Yves is talking about in the link you gave is, I believe, the securitization process, where the loans are pooled and sold. That is one end of the huge, ginormous fraud. At the other end you have the homeowner. In between you have the bank, the servicer, MERS, the trust, the foreclosure mill law firms......a lot of layers. And yes, you could sell the same loan more than once.

Another reason for all these layers (besides using them to hide what was going on), is that, once the banks started foreclosing, they did not actually have the needed documents to do so, and these needed to be created. Hence, LPS, Docx, NDEx, etc. Any of these entities would miraculously create the needed assignment for the bank. Banks still have many of the notes - but THEY SHOULD NOT have them because they sold them! But, since they have them, they say - well we can foreclose. Pretty neat trick.

Bringing all this to a judge in a non-judicial state is hard because foreclosures never go before a judge. You have to dig out documents and study them and know what to look for.

Basically I have had to give myself a crash course on several things - and I do not know enough about how it all works. Read Yves for technical background.
We really need judges to understand - and politicians. It is just so big that it is hard for them to believe - or the implications are too scary. A lot of the explosive information has come out in discovery from people bringing law suits and class action suits.

This comment is probably really disjointed. Valhalla is right about the time involved.

I was thinking that two big battles we have bearing down on us are 1) Social Security and 2) the mortgage mess. Then there is the Deficit 'debate' - which relates directly to SS. In fact, they all tie together as part of a functioning economy.

Submitted by lambert on

And if so, where the remedies were to be sought.

On the big big big picture, which doesn't help any given case (I don't think) it's accounting control fraud. See Bill Black. And the funders for the deficit terrorists, the foreclosure frauders, and the Social Security looters are all drawn from... a small circle, regardless of the proliferation of spokeholes, talking heads, career obfuscator etc. My $0.02.

Monopoly is so much fun I'd hate to lose the game!

Valhalla's picture
Submitted by Valhalla on

or some sort of indemnity/hold harmless? That was my first thought on seeing your comment. I don't know how big Ndex and LPS are, but I imagine they aren't anywhere near as big as say BOA. So in the unlikely event that plaintiffs began prevailing in lawsuits, they'd both be destroyed long before even one big bank like BOA and BOA gets to wash its hands of liability.

Mind, it's been years since I practiced law and neither corporate or any sort of mortgage law was ever my focus. Just a thought.

Submitted by MontanaMaven on

Couldn't ask for a much better one other than "Peace on Earth". But it does satisfy the "Goodwill to Men" part. Think I'll e-mail links to "A deal's a deal" Jon Tester.