Attorney General Chris Koster today announced that the state of Missouri and Lorraine Brown, former President of DocX, LLC, have reached a plea agreement. Under the agreement, Ms. Brown will plead guilty to one felony count of forgery, one felony count of perjury, and one misdemeanor count of making a false declaration.
Brown will be sentenced to a term of imprisonment of not less than two years and not to exceed three years in the Missouri Department of Corrections.
Ms. Brown is the former President of the company DocX, LLC. During the period of March to October 2009, DocX, at the direction of Brown, instituted a surrogate signing policy whereby employees signed, not their name, but the names of other employees on thousands of mortgage documents that were notarized and filed across the country. Prior to 2009, similar signing practices were also employed at DocX. Brown concealed these practices from her clients, the national mortgage servicers, and the parent company of DocX. The practices of DocX were brought to national attention by a “60 Minutes” report and resulted in several major lenders temporarily suspending foreclosures in 2010.
And that's not all! It be Federal too....
The guilty plea of Lorraine Brown, 56, of Alpharetta, Ga., was announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division; U.S. Attorney for the Middle District of Florida Robert E. O’Neill; and Michael Steinbach, Special Agent in Charge of the FBI’s Jacksonville Field Office.
The plea, to conspiracy to commit mail and wire fraud, was entered before U.S. Magistrate Judge Monte C. Richardson in Jacksonville federal court. Brown faces a maximum potential penalty of five years in prison and a $250,000 fine, or twice the gross gain or loss from the crime. The date for sentencing has not yet been set.
“Lorraine Brown participated in a scheme to fabricate mortgage-related documents at the height of the financial crisis,” said Assistant Attorney General Breuer. “She was responsible for more than a million fraudulent documents entering the system, directing company employees to forge and falsify documents relied on by property recorders, title insurers and others. Appropriately, she now faces the prospect of prison time.”
Ah, look what showed up...
So now about all those destroyed chains of title and alleged "mortgage trusts" that actually have no mortgages in them....
What is really interesting is that the legal complaint filed by Schneiderman talks about sloppy procedures for loan selection, but still does not get to the real fun, namely multiple pledges of loans for different RMBS. And you can be sure that Schneiderman does not really want to go that far because it might force him to ask the same question about the other, far larger issuers of RMBS.
Remember, the whole point of the Robo-signing settlement is not consumer protection, but rather fraud. The key question: Who’s got the note? If you don’t have to deliver the note into an RMBS trust, then the door is wide open for securities fraud.
What's being talked about here is the NY lawsuit against JPM (really Bear Stearns, but now JPM since they bought it) for securities fraud.
I have long maintained (since this crap begain to become public in 2007 and 2008) that the 900lb Gorilla in the room was going to come about when someone managed to bring the following argument before a Judge in a foreclosure action:
Your Honor, defendant moves that the plaintiff be required to show a full and complete accounting of all activity of the subject claimed note, including but not limited to:
The intent here is quite simple -- not only is there a judicial interest in guaranteeing that the person who is standing before the judge is really the assignee of the note (or his lawful agent) and there is only one of them out there (who is the one standing before the bar) in addition you can only collect on a loss via lawsuit or other payment once!
If you get into a car accident and your auto insurance pays your $20,000 in damage you cannot then sue the person who hit you, as you were made whole and you can only collect once. In point of fact the insurance company will almost-certainly force you to sign over your right to sue to them before they pay you, but if they don't you still can't sue the person who hit you as you have no economic harm as you were already paid!
Recovery by lawsuit, including foreclosure, requires economic harm. If there was no economic harm there is no foul and your judgment, which you may well be entitled to, is for $0.00. Further, if the person who actually suffered the harm isn't the one in court he can't recover anything because the wrong person is suing and only a real party at interest with economic harm can sue.
So if the bondholder was made whole via a credit default swap or any other act, including rescission, his claim on you is extinguished. The person who sold him the swap may have a legal claim via lawsuit or the person who was forced to buy back the bogus loan may have a right of recovery but he cannot foreclose unless he obtained possession of the defaulted instrument through that process of payment and if he does then he had better be the person standing in the courtroom before the judge.
This is really basic stuff here folks -- you don't get sue because you're "butt-hurt" by someone's acts; you can only sue to recover actual economic injury, whether your requested remedy is foreclosure or simple money damages.
Chris is onto this but this rabbit hole goes a lot further than many people think it does.
If -- and this is a big if -- we can get just one honest judge to hear these arguments and force that accounting to take place in his courtroom then the game is up.
This is an interesting analysis of securitization transactions, concluding that the process is inherently illegal on a number of levels -- including usury, tax evasion and common-law fraud.
It makes for fascinating reading, but of course in today's world where regulators and law enforcement is bribed with campaign donations, whether anyone will look at the issue at this level from an analytical point of view is rather unlikely....
A couple of months ago our local Sheriff tried to dodge the fraud in foreclosures and other mortgage instruments. I and a few others grilled him pretty good during a lunch meeting, but he held fast.
Well Mr. Sheriff, what do you say to this, and for those who are running for his office in our county in the upcoming election, who is willing to stand and promise to do the right thing?
Besides being the right thing to do, it will also win the race!
Sometimes law is complex, nuanced, difficult. Other times it’s black and white…you just read the words, look at the facts and the answer is unavoidable. Such is the case with the simmering dispute over the fact that the notes that are part of nearly every residential foreclosure case are not negotiable instruments. Oh sure, too many courts won’t take the time to consider the argument and…just yesterday I heard an appellate court argument where the judges just kept repeating the mantra, “this is a negotiable instrument” without ever doing any analysis at all and without any finding of that “fact” from the trial court. The attorney needed to stop the appellate judge right there and say, “No Your Honor, it’s Not A Negotiable Instrument”.
Matt then goes into a rather complicated and technical discussion of what all this means. I'll try to simplify it.
A negotiable instrument is (under the UCC Section 3) something that involves only (1) the payment of money, and (2) possibly the payment of interest. It can be payable on demand or a specific time.
Because it is an instrument that has no real interpretation available as to whether the terms were complied with or not (it's just about money) these can be passed around as if they were cash by simply "negotiating" (signing) the back. You can pass a check around like this; it is a negotiable instrument because it is payable on demand and it is only an instrument for a given amount of money.
A mortgage inherently contains other conditions, such as "you will maintain insurance", "you can prepay without penalty (or with one)", "the following things can be charged to you other than principal and interest", and "the note might be accelerated (due in full) if I do (or don't do!) x, y or z."
None of these are simply the payment of money on a given schedule or upon demand, coupled with a possible payment of interest. All involve other conditions, which make the note non-negotiable.
The reason it's not negotiable is that the formal process of assignment transfers not only the note but also the obligations of the parties, including the beneficiary -- who might have obligations. It is therefore much more formal than something that is "negotiable". Assignments require formalities like notaries and such, because everyone has to agree - - not just the borrower. And if the formalities are not followed then the assignment simply never happened and title to the note in question remains with the original party.
The import of this decision, assuming it stands, is significant. It means that the "defenses" to all the fraudclosure crap may just evaporate, as once you force recognition of all of those formalities if they didn't happen then the guy standing in front of the judge asking to steal your house fails, as he's not the right person to be making the request -- that is, he's a thief instead of a forecloser!
And once you force these institutions to come to court with true and complete documents you find that they can't -- they have played "fast and loose" with the documents, they don't have them at all, they try to cheat and forge them, and in some cases it appears they are trying to collect twice on the same instrument!
You can bet this ruling will be challenged, but there is hope so long as we have some real jurists that remain on the bench. And as Matt explains, attempting to use these arguments "pro-se" is dangerous, but the fact remains that there is progress in this decision.
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