Three state AGs to probe robosigning allegations

Written by Biloxi

As the 50 state Attorneys General are negotiating a settlement with the largest mortgage servicers for the bank abuses in the foreclosure crisis, several state Attorneys General this week have taken action to bring their own investigations into the foreclosure fraud. Last week, California Attorney General Kamala Harris created of Mortgage Fraud Strike Force with a team of seventeen lawyers and eight special agents from the state Department of Justice. This team will pursue corporate fraud, scams and fraudulent lending practices. According to the Attorney General's website, "Mortgage Fraud Strike Force will monitor and prosecute violations at every step of the mortgage process, from the origination of mortgage loans to the marketing of mortgage-backed securities to the investing public."


And that same week, Ms. Harris announced her first subpoena to Lender Processing Services, Inc. (LPS), as part of her continuing probe into "robosigning" of mortgage documents and other illegal activities according to the website.  Ms. Harris is requiring LPS produce documents and provide written answers to questions from her office from the time period from Jan. 1, 2007, until just before the compliance date, which is no later than June 24, 2011. Ms. Harris said "California homeowners have been exposed to fraud and crime at every step of the mortgage process. Justice demands we come to their aid and a key step in that is to investigate robosigning and the potential for inaccurate or unjust foreclosures."


And Attorney General Harris is correct. Many California homeowners have been victims of robo-signing which the banks' illegal practices of signed documents by individuals that were hired by banks that never verified the documents that they signed in order to foreclose on homeowners. Former LPS employees had testified that they "robosigned" foreclosure documents on the behalf of many of the largest mortgage lenders and servicers. The only question is how many California homeowners were victims is what Attorney General Harris has to seek that information. I did dig and find a property in California that was robosigned. And the robosigner did not work for LPS but with another company. And that company was Nationwide Title Clearing Inc., a Palm Harbor company in Florida that is another mortgage processing companies.  I only hope that Attorney General Harris adds Nationwide Title Clearing to her list to probe. Meet Bryan Bly, a Nationwide Title Clearing employee who has signed countless mortgage assignments as either a notary public or “vice president” of various lenders. Click here to read about Mr. Bly. Here is a mortgage assignment on a California property robosigned by Mr. Bly:


Bly Later Corrected by Green

Of course, robosigning is illegal in California as well as in other non-judicial states.Michael Patrick Rooney, a lawyer in San Francisco, California, examines legal rights in California of robosigning foreclosure affidavits and how robo-signing is illegal in the state of California. Mr. Rooney wrote:

Robo Signers are illegal in California because good title cannot be based on fraud, robo signed non judicial foreclosure sales are void as a matter of law, the documents are not able to be recorded in California if they are not notarized, which we know was often not done properly, and finally, because they robo signed forgeries ARE intended for judicial proceedings, including evictions and bankruptcy relief from stay motions.




Mr. Rooney cites a law case of a fraudulent transaction California law is settled. The Court in Trout v. Trout, (1934), 220 Cal. 652 at 656 where good title can't be based on fraud:



“Numerous authorities have established the rule that an instrument wholly void, such as an undelivered deed, a forged instrument, or a deed in blank, cannot be made the foundation of a good title, even under the equitable doctrine of bona fide purchase. Consequently, the fact that defendant Archer acted in good faith in dealing with persons who apparently held legal title, is not in itself sufficient basis for relief.” (Emphasis added, internal citations omitted).


In California Civil Code 2934a, requires that the beneficiary execute and notarize and record a substitution for a valid substitution of trustee to take effect. If the Assignment of Deed of Trust, the substitution of trustee, or the Notice of Default is robo-signed, the sale is void.
 
We just have to see where Attorney General Harris takes her investigation. She did announce that she will use the False Claim Act  in mortgage fraud cases.  Ms. Harris said last week at a news conference " “We are prepared to use it in a way that will look at all those who have made false statements or misled investors of any nature – be they individuals, institutions or municipalities."


In addition, another state Attorney General is probing LPS. Illinois Attorney General Lisa Madigan is not only probing LPS but also National Title Clearing Inc. according to her website. Attorney General Madigan Madigan will investigate reported allegations of these two  companies who engaged in the practice of “robosigning” legal documents filed with the court to foreclose on borrowers. She is asking former employees of these two companies and former employees of any residential mortgage servicer or bank who have  knowledge of any unlawful practices relating to this probe to call a special hotline to help with the investigation according to her website.


The state of Illinois is no stranger to robosigning scandal. After all, President Barack Obama, too, is a victim of robosigning. Check out the mortgage assignment of his property in Illinois that was robosigned. Click here to read more:

Also, it looks like New York Attorney General will be probing LPS and NTC according to NY Post website:


Indeed, New York State Attorney General Eric Schneiderman recently said that his office is probing mortgage processing firm Lender Processing Services and National Title Clearing.


We shall see the results of these three state Attorneys General's probes. The 50 state attorneys general looking into foreclosure fraud at major banks decided earlier this year not to pursue a criminal investigation after Iowa Attorney General Tom Miller, who heads the coalition, had publicly promised in December of last year that "We'll put people in jail."  Now, we see some of the state Attorneys General breaking away from Attorney General Miller's broken promise to hold the banks accountable. In the latest news of the 50 state Attorneys General's foreclosure fraud settlement with the major banks, the state Attorneys General and the major banks are discussing a settlement framework that may let the banks pick from a menu of options their own punishment. Let's hope not. That's like a judge to give Ponzi schemer Bernie Madoff a choice to pick his own sentence. If any or all of the three state Attorneys General are successful in bringing  criminal charges and convictions against the banks, then heads are going to roll and more lack of trust will be to the federal regulators to uphold the law.