A story in Wednesday’s Journal looks at one reason why mortgage companies have struggled to get foreclosures back on track: Banks are running into more challenges questioning whether they have properly documented ownership of mortgages.
The speed of bundling loans from nonbank lenders into mortgage securities sold by Wall Street has now spawned some confusion as banks’ lawyers have struggled to properly file foreclosures showing that mortgage trusts own their loans. Some lawyers say that confusion has prompted some attorneys and other mortgage firms to fabricate and backdate documents.
In January, the U.S. Trustee Program, a division of the Justice Department that oversees bankruptcy cases, raised “concerns about the integrity” of documents filed on behalf of Deutsche Bank in the bankruptcy case of Tiffany Kritharakis, 33, of Norwalk, Conn.
She fell behind on her mortgage payments after her husband lost his job in 2009. Her mortgage servicing company, American Home Mortgage Servicing Inc., has been trying to foreclose on behalf of a Deutsche Bank unit since 2010. In bankruptcy court, Ms. Kritharakis’ lawyer showed that the mortgage had never been assigned to a Deutsche trust after it was originated by a separate company and acquired by Option One Mortgage Corp.
In response, lawyers for American Home submitted new paperwork showing that the loan had been transferred last June to a company called Sand Canyon Corp., the parent of Option One. But that raised eyebrows because Sand Canyon executives previously testified that the firm exited the mortgage business entirely in 2008, meaning it wouldn’t have been able to assign anything in 2010.
“There’s definitely a false document that’s been submitted to this court, and someone’s got to take responsibility for it,” says Linda Tirelli, the lawyer for Ms. Kritharakis. She says her clients, who are both employed now, should receive modified loan payments.
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