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NY Post: House of Cards

The banks still just don’t get it.

In a staggering 92 percent of the claims brought by creditors asserting the right to foreclose against bankrupt families in New York City and the close-in suburbs, banks and mortgage servicers couldn’t prove they had the right to kick the families out on the street, a three-month probe by The Post has shown.

But that didn’t stop the banks from trying.

By robosigning documents and pressing foreclosures without the proper paperwork, banks have attempted to steamroll their way over sometimes-outgunned homeowners, The Post has uncovered.

But homeowners and the courts are starting to fight back.

Forced to finally face the mess, banks find themselves driven to the bargaining table, where they now hope to win a global settlement with all 50 states and the federal government. The tangled, complex mess in New York shows how tough — and expensive — such a settlement could be for the banks.

The Post dug through more than 150 Chapter 13 bankruptcy filings from June 2010 in New York’s Eastern and Southern federal court districts — covering the five boroughs, Long Island and nearby northern counties including Westchester–in search of local foreclosure or pre-foreclosure cases. We then put together a random sample of 40 cases where creditors such as banks — but more often loan servicers — filed proofs of claim for first mortgage debt.

The research unearthed claims riddled with robosigners, suspiciousdocuments and outrageous fees. And in a stunning 37 out of 40 cases, The Post discovered a broken chain of title from the original lender to the company now making claim against a local family for its home and thousands of dollars in questionable fees.

In other words, the bank or mortgage servicer filing the claim failed to prove it has any right at all to make a claim it was owed the debt or that it could seize the home in question.

The Post looked at Chapter 13 filings because the banks or mortgage servicers file proofs of claim for the debt and must, under penalty of perjury, include accurate information about the mortgage, note and fees. In New York, filing public records with “intent to deceive” is a felony.

EXPERIENCED foreclo sure defense lawyers who reviewed some of these cases for The Post say the findings reflect a widespread pattern of malfeasance by banks and loan servicers that has gone largely unchallenged for far too long.

“In-court borrowers are by definition broke and can’t hire document experts, but anybody who knows this terrain knows that stuff that looks this suspicious almost certainly is fraud,” says financial industry expert Yves Smith. “There are too many miraculous copies of documents showing up at the eleventh hour and nonsense like that to think this is clean.”

And attorneys say that despite banks’ and servicers’ pledges to clean up their act after the robosigning scandal came to light last fall, they are still relying on phony documents to boot New York families out of their homes.

“The largest financial institutions in the US are doing it every day, and I have not seen it slow down or stop,” says Westchester attorney Linda Tirelli. “The game is always the same: Make up documents and foreclose as fast as you can.”

Many homeowners have no lawyer to help them sort through the paperwork that servicers file, but some judges have been casting a sharply critical eye.

Just last month, Judge Arthur Schack dismissed a foreclosure by HSBC Bank against a Brooklyn homeowner, lambasting the bank and its lawyers for using robosigners and making false statements. He also ordered the bank’s CEO to come into court and explain why HSBC shouldn’t be slapped with a penalty.

Since last fall, New York’s chief Judge Jonathan Lippman has tried to address what he called deep flaws in the foreclosure process by requiring any attorney bringing a foreclosure action to sign an affidavit that the accuracy of supporting documents was verified first.

New York’s attorney general, Eric Schneiderman, has recently started pushing back hard against the banks, dashing their hopes of a quick deal with blanket immunity from prosecution.

“This certainly deserves an intensive investigation by the Department of Justice and attorneys general — a criminal investigation” says O. Max Gardner III, a North Carolina foreclosure defense attorney and a national expert on the inner workings of such cases.

CONTACTED about The Post’s findings, the American Bank ers Association shrugged them off as “specific lawsuits impacting specific stakeholders rather than an industry at large.”

In tracing the chain of title in these claims, The Post uncovered a pattern of problems centered on mortgage assignments — used when a mortgage is sold to a third party — and endorsements of notes, which is the paperwork that rides with the transfer of the mortgage giving the holder a rightful claim to foreclose.

These included:

* Missing or highly questionable endorsements of notes.

* Questionable timing of documents, including mortgage assignments by companies that were no longer in business on the date of the assignment.

* Signatures by robosigners — individuals who slapped their signature on hundreds of affidavits without attesting to their accuracy — on mortgage assignments.

* Proof-of-claim filings by mortgage servicers without documentation of their legal right to do so on behalf of the owner of the loan.

* Assignments created after the debtor filed for bankruptcy, when the law prevents a creditor from making any new claims.

* Mortgage assignments directly from the originator to the trustee for the securitized trust, bypassing the necessary intervening steps of transfer to the sponsor and depositor.

Most of the cases The Post reviewed had numerous red flags.

The cost to clean up this mess could run into the trillions, according to Georgetown University Law Center Professor Adam Levitin’s congressional testimony last fall.

“What we’re talking about is the creation of rights, and if someone forecloses on a home, at the time they foreclose, they have to have a legitimate right to do so,” says Prentiss Cox, professor at the University of Minnesota Law School. “You can’t foreclose and then go back and create the right.”

Home invasion

A Post probe revealed 92 percent of metro-area foreclosure actions had legal problems with paperwork in June of last year. Here are three properties that were taken from families under false pretenses and the problems with the filings.

Case #1 Blank endorsement page with robo-signator. This means the mortgage note was never transferred properly.

Case #2 Mortgage servicer brought action without needed paperwork for proof-of-claim need that servicer had standing in court .

Case #3 Mortgage transfer made after initial foreclosure filing is dated. Filing also had robosigner on other documents.

Research assistance by Wilson Dizard


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