Leading mortgage servicers such as HSBC, Wells Fargo, and Deutsche Bank have been using forged documents to foreclose on homeowners, reports 60 Minutes:
Wall Street cut corners when it created those mortgage-backed investments that triggered the financial collapse. Now that banks want to evict people, they're unwinding these exotic investments to find, that often, the legal documents behind the mortgages aren't there. Caught in a jam of their own making, some companies appear to be resorting to forgery and phony paperwork to throw people - down on their luck - out of their homes.
The problem began during the origination of loans that fed the housing bubble. In order to fast-track the slice-and-dice securitization process, mortgages were put into a shell company called MERS.
The creation of this system allowed mortgage companies to list MERS as the proxy for the true mortgage holder in local government records and to record subsequent changes of ownership in the MERS system only. Here’s what one expert told us about how it works:
“It’s like a Microsoft Excel spreadsheet, only bigger. It doesn’t have images of documents, it doesn’t have signatures in it. It doesn’t have copies of original documents,” explained Christopher Peterson, a law professor at the University of Utah who has written several research papers on MERS.
A member of the MERS system can put information in the database “if it feels like it,” Peterson said. “MERS uses the word ‘track,’ they say they track servicing rights or ownership rights, but that’s not really what they do. They’re more of a passive information receptacle.”
However when the mortgage servicers attempted to seize homes from their customers, they lacked the legal standing to do so. To cover this up, documents were fabricated in forgery factories, pushed through foreclosure mills, and processed in high-speed rocket dockets. The practice has caught the attention of the FBI:
Szymoniak says that the banks whose paperwork was handled by the Docx forgery mill include Wells Fargo, HSBC, Deutsche Bank, Citibank, U.S. Bank and Bank of America. We contacted all of them. Each said it farmed out its mortgage servicing work to other companies and it was those mortgage servicing firms that hired Docx.
Docx was owned by a company called LPS, a $2 billion firm that calls itself the nation's leading provider of mortgage processing services. LPS told us that when it found out about the phony signatures in 2009, it shut Docx down. The FBI and several states are investigating.
On the local level, officials are furious over being cut out of the land-recording process, which includes billions in fees. The Register of Deeds in North Carolina has sued MERS to recover the lost income, and in Massachusetts is taking deposits away from MERS member banks (Invest in Main Street through moveyourmoneyproject.org).