Homeowners and anti-foreclosure advocates are calling for bank officials and foreclosure attorneys to be criminally investigated and jailed for using fraudulent documents to force families from their homes.
Despite settling claims of foreclosure fraud with the U.S. Justice Department and 49 states, no bank official has been held criminally responsible for the submitted false documents in untold thousands of foreclosure proceedings.
"It makes mafia's organized crime look like fifth-grade math," said Patrick Powell of Cumming.
Powell said he became a victim of massive foreclosure fraud when he attempted to modify the loan on his Forsyth County home. He said the bank told him not to make his mortgage payments while it worked out the loan modification, then lost his 60-page modification application six times.
"When I called in to ask who the negotiator was and why I hadn't heard from him they're like, 'what modification? What package? We don't have any paperwork on you,'" Powell recalled.
Down-on-their-luck homeowners told similar stories at the World Congress Center in Atlanta earlier this year.
Thousands lined up, and some camped out, hoping counselors with the nonprofit Neighborhood Assistance Corporation of America could do what they couldn't do alone.
Some homeowners received lower payments; others lost their homes. Those homes will be auctioned off on courthouse steps.
Powell was about to lose his home when he saw a 60 Minutes report in 2011 that blew the lid off the industry's big secret.
The report revealed banks used phony documents to push people out of their homes. The documents were apparently created because banks lost the original documents when Wall Street bundled mortgages into trusts and sold them to investors.
Bank attorneys and foreclosure firms forged the documents, called assignment of mortgage, which sometimes contained incorrect information about the true owner of the mortgage. The signers that provided signatures of bank vice presidents and notaries were called robosigners.
60 Minutes exposed one prolific robosigner named Linda Green.
"I saw that and I said 'Linda Green!' I pulled out my assignment and it's Linda Green," said Powell, who thought courts would quickly toss out the case since the bank was trying to foreclose using fraudulent documents.
Powell said a judge refused to consider the possibly fraudulent documents. According to hearing transcripts, the judge chided Powell when he tried to explain the complex fraud.
An auditor and foreclosure fraud expert, Paula Rush, said Georgia judges have largely ignored the problem and "rubber-stamped whatever the banks want."
Rush said her research has shown banks are using phony documents to orchestrate a much more sinister fraud. Rush has researched Powell's case and said she believes the servicer never intended to modify his mortgage because investors stand to gain if the loan defaults.
Rush explained that investors who bought Powell's mortgage also bought insurance that pays out if homeowners stop paying and foreclosure occurs.
"What I see over and over again in the monthly investor reports is that the loan trusts that have a lot of insurances on them, there are no loan modifications being done. In the loan trusts that have no insurances left in them, they're doing lots of loan modifications," Rush said.
"It's misleading homeowners into thinking they stand a chance of getting a modification," Rush said.
Anti-foreclosure advocate Anne Batte called it a "racket."
Batte, who runs Operation Restoration, a grassroots group that helps homeowners fight illegal foreclosure, said people are being blamed for not paying their mortgage when they're caught in a vicious cycle of the bank's making. Batte said Georgia judges and court clerks who accept the forged papers only perpetuate the problem.
"If there was anything proactive on their part, they'd be able to stop a lot of that," Batte said.
An official in Massachusetts is cracking down on forged documents by refusing to accept them.
John O'Brien, Register of Deeds for the Southern Essex District in suburban Boston, has uncovered 38,000 fraudulent documents that have been recorded in his office. O'Brien said an outside audit revealed only 16 percent of the assignments in his registry are legitimate.
"Totally fraudulent. The signatures are fraudulent and the information in some of the documents are fraudulent and they knew this. The banks knew this and the attorneys who processed this know it," O'Brien said.
O'Brien found many different robosigners penned the same name.
"I can't look people in the eye and tell them who owns their mortgage because their mortgage has been sold so many times," O'Brien said.
Senka Huskic, of Peabody, MA, doesn't know who really owns her mortgage. She said Bank of America gave her the runaround when she tried to modify her loan and then tried to foreclose using a phony assignment. Huskic fought it and hasn't made a mortgage payment in nearly two years.
"I think they're not coming after me because the banks know I'm ready to sue them for wrongful foreclosure," Huskic said.
Only the mortgage owner can foreclose and since the bank made such a mess of the paperwork and her mortgage has been resold so many times, no one has been able to show who owns Huskic's note.
O'Brien said his office no longer accepts assignments completed by known robosigners. He instructed his staff to return them to the bank with an affidavit asking bank officials to swear to their authenticity. O'Brien said no bank has signed the affidavit and returned it.
"I am someone doing his job and I suspect the people of your state want your register of deeds to do their job," O'Brien said.
A CBS Atlanta investigation found Georgia officials aren't as willing to crack down on the fraud.
Cathelene Robinson, Fulton County's Clerk of Superior Court, said she's responsible for filing the documents, not verifying their authenticity.
When asked how difficult it would be reject assignments completed by known robosigners, Robinson said, "It would be major. We have been cut. Our budget has been cut. We are working with limited staff."
Earlier this year the nation's largest banks reached a $25 billion settlement with the U.S. Department of Justice and attorneys general from 49 states, including Georgia. The banks include Wells Fargo, Bank of America, GMAC/Ally Bank, Citibank and Chase.
Despite the settlement and promises to stop, it appears banks are still filing fraudulent assignments. O'Brien showed one assignment he received this spring that was completed by a suspected robosigner.
"I really believe [the banks are] a criminal enterprise. I truly believe this. They know what they're doing. They sit there and say they're too big to fail but they're not too big to go to jail," O'Brien said.
Georgia Attorney General Sam Olens signed the major settlement that netted Georgia nearly $100 million. Olens also pushed through a new law that gives him and county district attorneys power to criminally prosecute foreclosure fraud.
Olens said he believes the new legislation will lead to a reduction in the submission of fraudulent documents when individuals realize they can be prosecuted.
The new law allows Olens and district attorneys to investigate and prosecute only those crimes that occurred after July 1 of this year, but some believe Olens could investigate previous cases.
"If we get an investigation that shows fraud June 1, the law wasn't in effect then. We can't prosecute," Olens said.
But some believe Olens has power to prosecute previous cases because it's always been illegal to submit false documents.
"Look. It's more complicated than that," Olens said. "When you're dealing with the foreclosure process most of the time the documents weren't being changed in the state."
But Powell's assignment was signed in Georgia along with untold thousands of others inside an office in Alpharetta.
"I would love to see them go to jail," said Powell of bank officials and attorneys.
Powell is now suing his servicer and several banks to hold them accountable since police and prosecutors haven't.
To watch more of the interviews with Patrick Powell, Register of Deeds John O'Brien and auditor Paula Rush, click on the links in the sidebar.
For more information about Operation Restoration and its efforts to fight illegal foreclosure, click here.
Copyright 2012 WGCL-TV (Meredith Corporation). All rights reserved.
John O'Brien: Watch a Mass. Register of Deeds talk about fraudulent documents Watch video Patrick Powell: Watch a homeowner talk about fighting foreclosure Watch video Paula Rush: Watch auditor talkMore>>
Tuesday, April 20 2010 11:21 PM EDT2010-04-21 03:21:00 GMT
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