Mortgage Fraud Investigations
For those of you that may have missed it, Eileen Foster, a former executive vice president in charge of fraud investigations at Countrywide Financial, told Steve Kroft from 60 Minutes that mortgage fraud was a common occurrence at Countrywide under the leadership of Angelo Mozilo.
Jonathan C. Cross and Stacy Trimmer, Chadbourne & Parker, LLC
The New York Appellate Division, Second Department, has held that a lender does not have standing to commence a foreclosure action when the lender’s assignor was listed in the underlying mortgage instruments as a nominee and mortgagee for the purpose of recording, but never actually held the underlying notes. Bank of New York v. Silverberg, 926 N.Y.S.2d 532 (2d Dep’t 2011). The court’s decision casts doubt on the validity of loan assignments executed by the Mortgage Electronic Registration System (“MERS”), and has significant ramifications for the foreclosure process in New York, suggesting that foreclosing lenders may have to present substantially more robust documentation concerning the mortgage note’s history of assignment and transfer.
The Mortgage Agreements
In October 2006, Countrywide Home Loans, Inc. (“Countrywide”) allegedly loaned $450,000 to Stephen and Frederica Silverberg (“defendants”) to purchase residential real property. The mortgage named MERS as the mortgagee for purposes of recording, but stated that the underlying promissory note was in favor of Countrywide. The mortgage stated: “’MERS holds only legal title to the rights granted by the [defendants] . . . but, if necessary to comply with law or custom,” MERS had the right to foreclose and “to take any action required of [Countrywide].” Subsequently, in April 2007, the defendants allegedly signed a second mortgage on the same property, which again named MERS as the nominee and mortgagee of Countrywide, and executed a promissory note in Countrywide’s favor. The promissory note provided that Countrywide “may transfer this Note.”
In April 2007, the defendants signed a consolidation agreement which merged the two prior notes and mortgages into one loan obligation, once more naming MERS as nominee and mortgagee of Countrywide. While the consolidation agreement named Countrywide as the lender and note holder, Countrywide was not a party to this agreement. All of these agreements were recorded in the Suffolk County, New York Clerk’s office. In December 2007, the defendants allegedly defaulted on the consolidation agreement. On April 30, 2008, MERS assigned the consolidation agreement to the Bank of New York (“BoNY”), as trustee for a mortgage securitization vehicle, through a “corrected assignment of mortgage.”
Steve Dibert, MFI-Miami
Back in April and May, I posted a series of articles about how robo-signing seems to be out of control at Orlans Associates, a multi-state foreclosure mill located in Troy, Michigan and how the signature of one of their attorneys, Marshall Isaacs has more variations than the Kama Sutra. It’s pretty obvious that unless Marshall Isaacs suffers from some type of Multiple Personality Disorder, the signatures on the majority of these documents are not his.
I must of struck a nerve with Marshall Isaacs because he made bogus accusations to the Farmington Hills Police that I was committing a felony by blogging about him and his unethical behavior which of course the Oakland County Prosecutor refused to pursue because they deemed it frivolous and unwarranted.
It now appears Marshall Isaacs isn’t the only one in the Orlans organization attempting to play signature Kama Sutra. Five notaries employed at eTitle, a title company owned by Orlans Associates owner, Linda Orlans and run by her daughter Alison, either have multiple and distinct signatures on the documents they notarized for Marshall Isaacs or their signatures don’t match their Notary applications on file with the state of Michigan.
It also appears two of the notaries, Annette Matthews and Susan Solwold missed their calling as a wrist contortionists for Cirque Du Soliel. Matthews has five different distinct signatures that do not match the signature of her notary application on file with the state of Michigan. Susan Solwold has three different signatures with only one that matches her application on file with the state of Michigan.
Whoever signed Renee Caramagno’s signature on one document filed with Wayne County in August of 2010 didn’t even try to make it look like Caramagno’s signature.
The signatures of two notaries, Andrew Collins and Lindsay Fendrich are all consistent on the public records that eTitle or Orlans filed throughout the state of Michigan. However, their signatures do not match their notary applications. The address on Fendrich’s application is that of Orlans’ competitor, Postevio and Associates.
All of this clearly violates the Michigan Notary Public Act (P.A. 238 of 2003):
55.287 Signature of notary public; statements; stamp, seal, or electronic process; effect of illegible statement.Sec. 27. (1) A notary public shall place his or her signature on every record upon which he or she performs a notarial act. The notary public shall sign his or her name exactly as his or her name appears on his or her application for commission as a notary public.
Of course, this is assuming the person signing as the notary is actually the notary named on the affidavit or assignment. If these signatures were signed by someone else, it’called fraud. Either way, this now calls into question the legitimacy of the tens of thousands of mortgage assignments, affidavits and other documents filed by entities controlled by Linda Orlans in five states where the documents were notarized by Michigan notaries employed by Orlans or eTitle.
The Michigan Notary Public Act also offers stiff penalties to notaries and their employers who violate this act namely prosecution and/or civil liabilities to damaged parties especially if the notary was acting under the orders of their employers.
The alleged robo-signing of Marshall Isaacs’ signature and questionable notary signatures on the same documents creates a big problem for Linda Orlans and Marshall Isaacs because they could go to prison. Yes, the hard core prison where if you know what is good for you, you won’t drop the soap kind of prison. They could also be held liable for malpractice by their clients.
There is also no reason to suggest BAC or Fannie Mae, two of Orlans’ biggest clients, would come to their aid especially in a case where evidence of improprieties, alleged attorney misconduct and fraud are stacking up against them on thousands of mortgages everyday. In the Lucas case, BAC Home Loan Servicing showed no hesitation about throwing Orlans under the bus. In that case, BAC provided an affidavit showing Countrywide Home Loans sold Lucas’ mortgage to Fannie Mae in 2005. This is after Marshall Isaacs and Orlans filed both a Mortgage Assignment on July 2, 2009 from Countrywide to BAC and a Purchaser’s Affidavit stating BAC sold her mortgage to Fannie Mae in March 2010 with the Benzie County Register of Deeds.
The discovery of multiple fraudulent signatures by employees by a foreclosure mill that handles nearly 40% of the foreclosures in Michigan creates a nightmare scenario for the courts and the counties in Michigan because judges and the counties are now forced to untangle the mess created by the foreclosure mills. This is a crisis that has the potential to not only rival the chaos of Florida but could in all likelihood surpass it. Unlike Florida that is a judicial foreclosure state where foreclosures are donein the open, Michigan is a non-judicial where foreclosures get buried until one day they boil up from the ground like the toxic waste that bubbled up from the ground at Love Canal thirty years ago.
Notary fraud in Michigan is supposed to be investigated by the Secretary of State’s office. Unfortunately, any investigation done by Michigan’s new Republican Secretary of State, Ruth Johnson may be considered tainted due to her political ties to both Linda and Alison Orlans. Linda Orlans and her daughter Alison gave Ruth Johnson’s Secretary of State campaign $7200 last year. The Orlanses also gave quite generously to the Michigan Republican Party.
It will be interesting to see how this plays out over the next few weeks.
The Appellate Division of the New York Supreme Court handed down a ruling last week that could hamper a mortgage servicer from foreclosing on a homeowner. Last week, the court ruled in a foreclosure case that MERS was without authority to assign the power to foreclose to the foreclosing party. New York law requires that the foreclosing party be both the holder or assignee of the subject mortgage, and the holder or assignee of the underlying note, at the time the action is commenced. In this case, the homeowners defaulted on their mortgage which stated MERS was the mortgagee because they are the nominee for Countrywide. Five months later, MERS assigned the mortgage to an asset backed security with Bank of New York-Mellon acting as Trustee. The servicer of this loan then commenced foreclosure proceedings against the homeowner.
