Blame Dishonest Banks, Not Ethical Lawyers Exposing Foreclosure Frauds
Monday, 11/29/2010 - 1:12 pm by Thomas A. Cox | 10 Comments
Thomas A. Cox, a volunteer lawyer from Maine who outed the first robo-signer, wrote a letter in response to attacks against those who are defending homeowners facing foreclosure. He demands that the blame be placed on the banks, where it belongs — not on the lawyers working to expose fraud.
Dear Judge Sarokin:
I take issue with your Huffington Post article of November 22, 2010, in which you criticize lawyers defending homeowners in foreclosure cases. You assert, “To oppose the foreclosure, when both the borrower and lawyer know the mortgage is in substantial default, to my mind borders on the unethical.” Not only is this assertion grossly unfair to these overworked, dedicated and ethical lawyers, it is based upon a fundamentally false premise as to the mechanics of the foreclosure summary judgment process. Inexplicably, you fail to offer the slightest criticism of the foreclosure industry and the ethics of its lawyers, who have presented thousands of false (and literally perjurious) affidavits in foreclosure summary judgment motions all across the county.
You have had a long career as judge in both the United States District Court (N.J.) and the Third Circuit Court of Appeals. I have had the privilege of practicing law for many years, in both the Maine State and Federal Courts as well as before the First Circuit Court of Appeals before my retirement. The arc of our respective careers encompassed the (quite different) bank crisis of the late 1980s and early 1990s in which there was also a great deal of foreclosure activity, although at nothing near the extraordinary levels of these times.
During that banking crisis, much of my legal work was devoted to representing banks and the FDIC in the same Federal Court system in which you worked, using the same Federal Rules of Procedure that you used. For the past two and a half years, I have been engaged as a full-time volunteer to represent homeowners in foreclosure cases in these same courts. The rules relating to the handling of summary judgment motions in foreclosure cases have not changed in any substantial way since you were on the bench, yet inexplicably you misstate their requirements. In doing so, you excuse loan servicers and their lawyers for presenting of false affidavits in thousands of cases. I cannot believe that you would ever have tolerated the presentation of false or perjured testimony in your courtroom, and I cannot understand why you are willing to excuse it now.
You excuse the perjurious affidavits by implying that attacks on those documents, based upon the lack of personal knowledge of the affiants, are unfounded. You state:
It would be virtually impossible in any bank (even in those in which the mortgage remained with the issuing bank) for one person to know how much was loaned and precisely when and how much was paid on account. In this day and age, all of that information comes via computer printouts — not personal knowledge.
In making this statement, you display an apparent failure to recall what the Federal Rules of Civil Procedure say regarding summary judgment affidavits. Rule 56(e) explicitly requires that all such affidavits must be made upon personal knowledge. There is no exception in that rule for foreclosures or for mortgage loan servicers, yet you imply that they should not have to respect this requirement.
You fail to recognize that the required personal knowledge is not of the details of the loan and the balances due. Rather, what is required is knowledge of the requisite facts to authenticate and establish the accuracy of their employers’ business records and computerized accounting systems. I filed many summary judgment motions on behalf of my FDIC and bank clients, and in not one instance did the affiant have knowledge of any of the details of the loan or of the balances due. In every instance, however, my witnesses did have direct personal knowledge of the facts relating to the keeping of the records for these loans and for the systems used to calculate loan balances. I never lost one of those motions for summary judgment, and I would have been greatly embarrassed if I had.
Today, I have yet to see a single affidavit from a loan servicer witness that adequately meets this personal knowledge requirement. As a consequence, I estimate that I, and the lawyers with whom I consult, win about 75% of the time by opposing these summary judgment motions based upon false affidavits. Yet the lawyers presenting these dishonest affidavits show no sense of shame when they lose, because in the 90% of the cases where they are unopposed, they win by default, collect their fees and go home happy. This failure to present honest and competent evidence arises not out of an inability to meet the requirements, but out of their stubborn refusal to devote the necessary resources to honestly comply with the rule.
You assert, “I am concerned with the stability of contracts, the rule of law, if they are abandoned at this fragile time in our economy.” But you imply that it is foreclosure defense lawyers who are jeopardizing the prized concept of “the rule of law” when they attack these improper foreclosure filings. These lawyers are performing the highest calling of our profession as they expose the blatant dishonesty of the nation’s largest financial institutions. None of our present knowledge about this outrageous and widespread phenomenon would have been revealed but for the efforts of the hardworking and ethical lawyers representing homeowners.
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So much do these institutions try to hide this dishonesty that GMAC Mortgage, LLC attacked me personally for exposing the abusive affidavit signing practices of its Limited Signing Officer, Jeffery Stephan. One of his many affidavits had been filed in a case in which I was representing a Maine homeowner, and the local judge accepted it as true. Thereafter, I deposed Stephan and revealed that he did not bother to read any of the affidavits that he signed, did not know whether they were true, and did not know they contained major errors. He even readily admitted that he did not appear before the notaries he supervised when they signed statements that he had personally appeared before them to be sworn. Stephan signed between 8,000 to 10,000 documents a month (not all were affidavits), and his affidavits were sent to courts all over the country. When I discovered this outrageous fraud, I shared the transcript of my deposition on a listserv with other lawyers from around the country who represent homeowners so that they could protect their clients from being victimized by his false affidavits.
GMAC Mortgage wanted to keep Stephan’s testimony under wraps so badly that it tried to obtain a court order to stop me from sharing it with other foreclosure defense lawyers, and it asked the court to fine me personally for what it called my “malicious dissemination” of the transcript. I was outraged by these efforts to intimidate and gag me, having never experienced such offensive conduct in my forty years as a lawyer. I fear that many younger or less experienced lawyers might have been cowed into silence by any similar efforts. Our judge did not hesitate to deny the GMAC Mortgage motion to gag and fine me and in one case imposed lawyers’ fees sanctions of over $27,000 against it for its bad faith filing of the affidavit from Stephan.
In the situation that I have just described, it is the “rule of law”, for which you express concern, which worked exactly as it should in revealing misconduct by one of our major financial institutions. Our judge here in Maine had no problem with finding the conduct of GMAC Mortgage to have been carried out in “bad faith”. When we showed the judge that GMAC had been caught in exactly the same conduct in Florida four years earlier, he stated, “despite the Florida Court’s order, GMAC’s flagrant disregard [of the law] apparently persists. It is well past time for such practices to end.” What I find so troubling about your article is that you fail to condemn either the loan servicers or their lawyers for their clearly unethical conduct in presenting false evidence to the courts. In your failure to condemn such conduct, you also fail to use the stature of the office that you once held to inspire other judges to confront and root out misconduct.
You minimize the now indisputable fact that the nation’s largest financial institutions have lied to courts in thousands of foreclosure cases. You raise no concern for the fact that our citizens’ trust in the judicial system has been deeply shaken by the revelation that our financial institutions have foreclosed upon hundreds of thousands of homes by the presentation of false evidence in courts all over the country. In the plea at the end of your article, “let us not sacrifice the rule of law and the sanctity of contracts in the process,” you imply that lawyers for homeowners are the ones at fault. But it so clearly is the banks, the trusts and their loan servicers who want to sacrifice the rule of law and who refuse to respect the sanctity of their contracts. They appear to have succeeded in far too many courts in obtaining special exceptions to our rule of law requirements. As a result, American citizens have been left to wonder whether they can receive fair treatment by our courts when confronted by large corporate adversaries.
Your expression of concern for our fragile economy suggests that you believe that the rule of law is a relative concept. You seem to suggest that it should be set aside when it comes to protecting homeowners in foreclosures in order to protect our recovery. One of the fundamental precepts of our Constitution is that the individual rights guaranteed by our laws must never be sacrificed. Due process of law is not a relative concept, it is an absolute. Our failure to preserve that concept is what led to the unconstitutional internment of thousands of Japanese Americans during World War II and must not be repeated here. There are no exceptions in the due process clause of the United States Constitution.
Finally, I must answer the implication in your article that there is a widespread practice among foreclosure defense lawyers of denying the existence of loan defaults when they are found. While you have been retired for many years, I have been working with many lawyers in actual foreclosure defense for almost three years. In addition, I am in constant communication with foreclosure defense lawyers all over the country. I have seen no evidence at all to support your assertion. While there will always be exceptions, I do not believe that there are widespread denials of defaults where they actually exist. What you seem to overlook is the fact that, even when defaults do exist, it is not only appropriate, but a matter of professional responsibility for a homeowner’s lawyer to challenge the standing of any party asserting that default when that party clearly lacks standing to seek a foreclosure, when it is unable to prove that it owns the loan that it is trying to foreclose upon, or when it is unable to prove that it has provided the homeowner with the contractually created right to a proper notice of default and the right to cure it.
I greatly respect the office that you held as a judge in our Federal court system. But I can neither agree with the discredit that you lay upon the foreclosure defense bar, nor can I understand your unwillingness, as one having extensive judicial experience, to explicitly condemn the conduct of loan servicers and their lawyers. I sincerely urge you to reconsider your remarks, to retract them, and to make a public apology to all of the private bar and legal servicer lawyers who are struggling so hard, often for low pay, to preserve the integrity of our judicial system against the rampant dishonesty of the foreclosure industry and its exceedingly well-paid lawyers.
Respectfully submitted,
Thomas A. Cox
Portland, Maine
November 26, 2010
Thomas A. Cox is a retired bank lawyer in Portland, Maine who serves as the Volunteer Program Coordinator for the Maine Attorney’s Saving Homes (MASH) program. He represents homeowners in foreclosure, and assists and consults with other volunteer lawyers in providing pro bono legal services to these Maine homeowners.
I’ve taken a particular interest in GMAC because in the one consumer foreclosure case I
‘ve attended, back in May, I had the dubious pleasure of seeing a GMAC employee and an attorney for the local foreclosure mill, who was also put on the stand, perjure themselves. And this isn’t my interpretation; documentary evidence was presented later in the trial that showed core elements of each of their testimony to be false. The GMAC staffer, who had made confident statements about the case and provided plenty of bromides about the integrity of GMAC’s processes, was suddenly reluctant to say anything more definitive than “I don’t know.”
A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).
Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:
GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….
The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.
Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.
But if that isn’t bad enough, get a load of this, courtesy Bloomberg:
Fannie Mae, the largest provider of mortgage financing in the U.S., said it halted referrals to a Florida foreclosure-processing law firm that’s being investigated by the state attorney general.
The Law Offices of David J. Stern PA have drawn scrutiny in Attorney General Bill McCollum’s investigation into the foreclosure of homes based on possibly fraudulent or improperly prepared documents….Fannie Mae, which has a $3.3 trillion book of business, has hired law firm Bradley Arant Boult Cummings LLP to review Stern’s processes and operations.
Why is this problematic? The profile of a typical foreclosure mill is a very high staff to partner ratio, as many as 90 to 100 paralegals for every partner. Their processes are routinized. Foreclosure mills are evaluated according to parameters set by Fannie and Freddie, in case of GSE securtizations. Most of this coordination and assessment does not take place directly, but via a firm called Lender Processing Services, which serves as a defacto outsourced manager on behalf of the GSEs and servicers.
It is hardly news that foreclosure mills in the LPS/Fannie/Freddie network were engaging in questionable conduct. Consider this June 2009 statement:
Attorney General Richard Blumenthal, as part of an investigation into the foreclosure business in Connecticut, has requested information from mortgage giants Lender Processing Services, Inc., Freddie Mac and Fannie Mae concerning their process for selecting law firms in foreclosure proceedings.
Blumenthal is investigating reports that a majority of Connecticut foreclosures are assigned to only a few select law firms, and complaints by consumers who said they did not receive proper foreclosure notices from marshals.
In letters to Lender Processing Services, Inc., the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), Blumenthal said he understands that these organizations maintain a network of law firms that perform legal services relating to foreclosure actions…
“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices — wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks,” Blumenthal said. “Concentrating this work in a few hands can be severely problematic — causing unconscionable costs and failed notice delivery. These companies — mortgage lending giants — have a public trust.’
Now how does this relate to GMAC and Bradley Arant? LPS and the mills they hire work in an integrated fashion. Moreover, Freddie, Fannie, and the servicers have chosen to work with firms that operate in a high-volume, highly standardized manner. Blumenthal clearly was of the view that Fannie and Freddie would bear some, perhaps a great deal, of responsibility for any improprieties, since the law firm was operating less independently than would normally be the case.
GMAC also used the David Stern law firm. Thus both due to its desire to deepen its relationship with Fannie and to keep itself and GMAC out of trouble, Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.
A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.
So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.
As former central banker Willem Buiter remarked, “Regulation is to self regulation as regard is to self regard.” The only way for an investigation of this sordid business to succeed is for it to be truly independent, and that means requisitioned and executed by parties that have their hands clean. If any of these companies had a new CEO or a particularly tough compliance/internal audit function, they might fill that bill. However, the very choice of Bradley Arant strongly suggests that these examinations are exercises in form over substance.
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Blame Dishonest Banks, Not Ethical Lawyers Exposing Foreclosure Frauds
Monday, 11/29/2010 - 1:12 pm by Thomas A. Cox | 10 Comments
Thomas A. Cox, a volunteer lawyer from Maine who outed the first robo-signer, wrote a letter in response to attacks against those who are defending homeowners facing foreclosure. He demands that the blame be placed on the banks, where it belongs — not on the lawyers working to expose fraud.
Dear Judge Sarokin:
I take issue with your Huffington Post article of November 22, 2010, in which you criticize lawyers defending homeowners in foreclosure cases. You assert, “To oppose the foreclosure, when both the borrower and lawyer know the mortgage is in substantial default, to my mind borders on the unethical.” Not only is this assertion grossly unfair to these overworked, dedicated and ethical lawyers, it is based upon a fundamentally false premise as to the mechanics of the foreclosure summary judgment process. Inexplicably, you fail to offer the slightest criticism of the foreclosure industry and the ethics of its lawyers, who have presented thousands of false (and literally perjurious) affidavits in foreclosure summary judgment motions all across the county.
You have had a long career as judge in both the United States District Court (N.J.) and the Third Circuit Court of Appeals. I have had the privilege of practicing law for many years, in both the Maine State and Federal Courts as well as before the First Circuit Court of Appeals before my retirement. The arc of our respective careers encompassed the (quite different) bank crisis of the late 1980s and early 1990s in which there was also a great deal of foreclosure activity, although at nothing near the extraordinary levels of these times.
During that banking crisis, much of my legal work was devoted to representing banks and the FDIC in the same Federal Court system in which you worked, using the same Federal Rules of Procedure that you used. For the past two and a half years, I have been engaged as a full-time volunteer to represent homeowners in foreclosure cases in these same courts. The rules relating to the handling of summary judgment motions in foreclosure cases have not changed in any substantial way since you were on the bench, yet inexplicably you misstate their requirements. In doing so, you excuse loan servicers and their lawyers for presenting of false affidavits in thousands of cases. I cannot believe that you would ever have tolerated the presentation of false or perjured testimony in your courtroom, and I cannot understand why you are willing to excuse it now.
You excuse the perjurious affidavits by implying that attacks on those documents, based upon the lack of personal knowledge of the affiants, are unfounded. You state:
It would be virtually impossible in any bank (even in those in which the mortgage remained with the issuing bank) for one person to know how much was loaned and precisely when and how much was paid on account. In this day and age, all of that information comes via computer printouts — not personal knowledge.
In making this statement, you display an apparent failure to recall what the Federal Rules of Civil Procedure say regarding summary judgment affidavits. Rule 56(e) explicitly requires that all such affidavits must be made upon personal knowledge. There is no exception in that rule for foreclosures or for mortgage loan servicers, yet you imply that they should not have to respect this requirement.
You fail to recognize that the required personal knowledge is not of the details of the loan and the balances due. Rather, what is required is knowledge of the requisite facts to authenticate and establish the accuracy of their employers’ business records and computerized accounting systems. I filed many summary judgment motions on behalf of my FDIC and bank clients, and in not one instance did the affiant have knowledge of any of the details of the loan or of the balances due. In every instance, however, my witnesses did have direct personal knowledge of the facts relating to the keeping of the records for these loans and for the systems used to calculate loan balances. I never lost one of those motions for summary judgment, and I would have been greatly embarrassed if I had.
Today, I have yet to see a single affidavit from a loan servicer witness that adequately meets this personal knowledge requirement. As a consequence, I estimate that I, and the lawyers with whom I consult, win about 75% of the time by opposing these summary judgment motions based upon false affidavits. Yet the lawyers presenting these dishonest affidavits show no sense of shame when they lose, because in the 90% of the cases where they are unopposed, they win by default, collect their fees and go home happy. This failure to present honest and competent evidence arises not out of an inability to meet the requirements, but out of their stubborn refusal to devote the necessary resources to honestly comply with the rule.
You assert, “I am concerned with the stability of contracts, the rule of law, if they are abandoned at this fragile time in our economy.” But you imply that it is foreclosure defense lawyers who are jeopardizing the prized concept of “the rule of law” when they attack these improper foreclosure filings. These lawyers are performing the highest calling of our profession as they expose the blatant dishonesty of the nation’s largest financial institutions. None of our present knowledge about this outrageous and widespread phenomenon would have been revealed but for the efforts of the hardworking and ethical lawyers representing homeowners.
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So much do these institutions try to hide this dishonesty that GMAC Mortgage, LLC attacked me personally for exposing the abusive affidavit signing practices of its Limited Signing Officer, Jeffery Stephan. One of his many affidavits had been filed in a case in which I was representing a Maine homeowner, and the local judge accepted it as true. Thereafter, I deposed Stephan and revealed that he did not bother to read any of the affidavits that he signed, did not know whether they were true, and did not know they contained major errors. He even readily admitted that he did not appear before the notaries he supervised when they signed statements that he had personally appeared before them to be sworn. Stephan signed between 8,000 to 10,000 documents a month (not all were affidavits), and his affidavits were sent to courts all over the country. When I discovered this outrageous fraud, I shared the transcript of my deposition on a listserv with other lawyers from around the country who represent homeowners so that they could protect their clients from being victimized by his false affidavits.
GMAC Mortgage wanted to keep Stephan’s testimony under wraps so badly that it tried to obtain a court order to stop me from sharing it with other foreclosure defense lawyers, and it asked the court to fine me personally for what it called my “malicious dissemination” of the transcript. I was outraged by these efforts to intimidate and gag me, having never experienced such offensive conduct in my forty years as a lawyer. I fear that many younger or less experienced lawyers might have been cowed into silence by any similar efforts. Our judge did not hesitate to deny the GMAC Mortgage motion to gag and fine me and in one case imposed lawyers’ fees sanctions of over $27,000 against it for its bad faith filing of the affidavit from Stephan.
In the situation that I have just described, it is the “rule of law”, for which you express concern, which worked exactly as it should in revealing misconduct by one of our major financial institutions. Our judge here in Maine had no problem with finding the conduct of GMAC Mortgage to have been carried out in “bad faith”. When we showed the judge that GMAC had been caught in exactly the same conduct in Florida four years earlier, he stated, “despite the Florida Court’s order, GMAC’s flagrant disregard [of the law] apparently persists. It is well past time for such practices to end.” What I find so troubling about your article is that you fail to condemn either the loan servicers or their lawyers for their clearly unethical conduct in presenting false evidence to the courts. In your failure to condemn such conduct, you also fail to use the stature of the office that you once held to inspire other judges to confront and root out misconduct.
You minimize the now indisputable fact that the nation’s largest financial institutions have lied to courts in thousands of foreclosure cases. You raise no concern for the fact that our citizens’ trust in the judicial system has been deeply shaken by the revelation that our financial institutions have foreclosed upon hundreds of thousands of homes by the presentation of false evidence in courts all over the country. In the plea at the end of your article, “let us not sacrifice the rule of law and the sanctity of contracts in the process,” you imply that lawyers for homeowners are the ones at fault. But it so clearly is the banks, the trusts and their loan servicers who want to sacrifice the rule of law and who refuse to respect the sanctity of their contracts. They appear to have succeeded in far too many courts in obtaining special exceptions to our rule of law requirements. As a result, American citizens have been left to wonder whether they can receive fair treatment by our courts when confronted by large corporate adversaries.
Your expression of concern for our fragile economy suggests that you believe that the rule of law is a relative concept. You seem to suggest that it should be set aside when it comes to protecting homeowners in foreclosures in order to protect our recovery. One of the fundamental precepts of our Constitution is that the individual rights guaranteed by our laws must never be sacrificed. Due process of law is not a relative concept, it is an absolute. Our failure to preserve that concept is what led to the unconstitutional internment of thousands of Japanese Americans during World War II and must not be repeated here. There are no exceptions in the due process clause of the United States Constitution.
Finally, I must answer the implication in your article that there is a widespread practice among foreclosure defense lawyers of denying the existence of loan defaults when they are found. While you have been retired for many years, I have been working with many lawyers in actual foreclosure defense for almost three years. In addition, I am in constant communication with foreclosure defense lawyers all over the country. I have seen no evidence at all to support your assertion. While there will always be exceptions, I do not believe that there are widespread denials of defaults where they actually exist. What you seem to overlook is the fact that, even when defaults do exist, it is not only appropriate, but a matter of professional responsibility for a homeowner’s lawyer to challenge the standing of any party asserting that default when that party clearly lacks standing to seek a foreclosure, when it is unable to prove that it owns the loan that it is trying to foreclose upon, or when it is unable to prove that it has provided the homeowner with the contractually created right to a proper notice of default and the right to cure it.
I greatly respect the office that you held as a judge in our Federal court system. But I can neither agree with the discredit that you lay upon the foreclosure defense bar, nor can I understand your unwillingness, as one having extensive judicial experience, to explicitly condemn the conduct of loan servicers and their lawyers. I sincerely urge you to reconsider your remarks, to retract them, and to make a public apology to all of the private bar and legal servicer lawyers who are struggling so hard, often for low pay, to preserve the integrity of our judicial system against the rampant dishonesty of the foreclosure industry and its exceedingly well-paid lawyers.
Respectfully submitted,
Thomas A. Cox
Portland, Maine
November 26, 2010
Thomas A. Cox is a retired bank lawyer in Portland, Maine who serves as the Volunteer Program Coordinator for the Maine Attorney’s Saving Homes (MASH) program. He represents homeowners in foreclosure, and assists and consults with other volunteer lawyers in providing pro bono legal services to these Maine homeowners.
I’ve taken a particular interest in GMAC because in the one consumer foreclosure case I
‘ve attended, back in May, I had the dubious pleasure of seeing a GMAC employee and an attorney for the local foreclosure mill, who was also put on the stand, perjure themselves. And this isn’t my interpretation; documentary evidence was presented later in the trial that showed core elements of each of their testimony to be false. The GMAC staffer, who had made confident statements about the case and provided plenty of bromides about the integrity of GMAC’s processes, was suddenly reluctant to say anything more definitive than “I don’t know.”
A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).
Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:
GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….
The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.
Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.
But if that isn’t bad enough, get a load of this, courtesy Bloomberg:
Fannie Mae, the largest provider of mortgage financing in the U.S., said it halted referrals to a Florida foreclosure-processing law firm that’s being investigated by the state attorney general.
The Law Offices of David J. Stern PA have drawn scrutiny in Attorney General Bill McCollum’s investigation into the foreclosure of homes based on possibly fraudulent or improperly prepared documents….Fannie Mae, which has a $3.3 trillion book of business, has hired law firm Bradley Arant Boult Cummings LLP to review Stern’s processes and operations.
Why is this problematic? The profile of a typical foreclosure mill is a very high staff to partner ratio, as many as 90 to 100 paralegals for every partner. Their processes are routinized. Foreclosure mills are evaluated according to parameters set by Fannie and Freddie, in case of GSE securtizations. Most of this coordination and assessment does not take place directly, but via a firm called Lender Processing Services, which serves as a defacto outsourced manager on behalf of the GSEs and servicers.
It is hardly news that foreclosure mills in the LPS/Fannie/Freddie network were engaging in questionable conduct. Consider this June 2009 statement:
Attorney General Richard Blumenthal, as part of an investigation into the foreclosure business in Connecticut, has requested information from mortgage giants Lender Processing Services, Inc., Freddie Mac and Fannie Mae concerning their process for selecting law firms in foreclosure proceedings.
Blumenthal is investigating reports that a majority of Connecticut foreclosures are assigned to only a few select law firms, and complaints by consumers who said they did not receive proper foreclosure notices from marshals.
In letters to Lender Processing Services, Inc., the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), Blumenthal said he understands that these organizations maintain a network of law firms that perform legal services relating to foreclosure actions…
“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices — wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks,” Blumenthal said. “Concentrating this work in a few hands can be severely problematic — causing unconscionable costs and failed notice delivery. These companies — mortgage lending giants — have a public trust.’
Now how does this relate to GMAC and Bradley Arant? LPS and the mills they hire work in an integrated fashion. Moreover, Freddie, Fannie, and the servicers have chosen to work with firms that operate in a high-volume, highly standardized manner. Blumenthal clearly was of the view that Fannie and Freddie would bear some, perhaps a great deal, of responsibility for any improprieties, since the law firm was operating less independently than would normally be the case.
GMAC also used the David Stern law firm. Thus both due to its desire to deepen its relationship with Fannie and to keep itself and GMAC out of trouble, Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.
A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.
So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.
As former central banker Willem Buiter remarked, “Regulation is to self regulation as regard is to self regard.” The only way for an investigation of this sordid business to succeed is for it to be truly independent, and that means requisitioned and executed by parties that have their hands clean. If any of these companies had a new CEO or a particularly tough compliance/internal audit function, they might fill that bill. However, the very choice of Bradley Arant strongly suggests that these examinations are exercises in form over substance.
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Blame Dishonest Banks, Not Ethical Lawyers Exposing Foreclosure Frauds
Monday, 11/29/2010 - 1:12 pm by Thomas A. Cox | 10 Comments
Thomas A. Cox, a volunteer lawyer from Maine who outed the first robo-signer, wrote a letter in response to attacks against those who are defending homeowners facing foreclosure. He demands that the blame be placed on the banks, where it belongs — not on the lawyers working to expose fraud.
Dear Judge Sarokin:
I take issue with your Huffington Post article of November 22, 2010, in which you criticize lawyers defending homeowners in foreclosure cases. You assert, “To oppose the foreclosure, when both the borrower and lawyer know the mortgage is in substantial default, to my mind borders on the unethical.” Not only is this assertion grossly unfair to these overworked, dedicated and ethical lawyers, it is based upon a fundamentally false premise as to the mechanics of the foreclosure summary judgment process. Inexplicably, you fail to offer the slightest criticism of the foreclosure industry and the ethics of its lawyers, who have presented thousands of false (and literally perjurious) affidavits in foreclosure summary judgment motions all across the county.
You have had a long career as judge in both the United States District Court (N.J.) and the Third Circuit Court of Appeals. I have had the privilege of practicing law for many years, in both the Maine State and Federal Courts as well as before the First Circuit Court of Appeals before my retirement. The arc of our respective careers encompassed the (quite different) bank crisis of the late 1980s and early 1990s in which there was also a great deal of foreclosure activity, although at nothing near the extraordinary levels of these times.
During that banking crisis, much of my legal work was devoted to representing banks and the FDIC in the same Federal Court system in which you worked, using the same Federal Rules of Procedure that you used. For the past two and a half years, I have been engaged as a full-time volunteer to represent homeowners in foreclosure cases in these same courts. The rules relating to the handling of summary judgment motions in foreclosure cases have not changed in any substantial way since you were on the bench, yet inexplicably you misstate their requirements. In doing so, you excuse loan servicers and their lawyers for presenting of false affidavits in thousands of cases. I cannot believe that you would ever have tolerated the presentation of false or perjured testimony in your courtroom, and I cannot understand why you are willing to excuse it now.
You excuse the perjurious affidavits by implying that attacks on those documents, based upon the lack of personal knowledge of the affiants, are unfounded. You state:
It would be virtually impossible in any bank (even in those in which the mortgage remained with the issuing bank) for one person to know how much was loaned and precisely when and how much was paid on account. In this day and age, all of that information comes via computer printouts — not personal knowledge.
In making this statement, you display an apparent failure to recall what the Federal Rules of Civil Procedure say regarding summary judgment affidavits. Rule 56(e) explicitly requires that all such affidavits must be made upon personal knowledge. There is no exception in that rule for foreclosures or for mortgage loan servicers, yet you imply that they should not have to respect this requirement.
You fail to recognize that the required personal knowledge is not of the details of the loan and the balances due. Rather, what is required is knowledge of the requisite facts to authenticate and establish the accuracy of their employers’ business records and computerized accounting systems. I filed many summary judgment motions on behalf of my FDIC and bank clients, and in not one instance did the affiant have knowledge of any of the details of the loan or of the balances due. In every instance, however, my witnesses did have direct personal knowledge of the facts relating to the keeping of the records for these loans and for the systems used to calculate loan balances. I never lost one of those motions for summary judgment, and I would have been greatly embarrassed if I had.
Today, I have yet to see a single affidavit from a loan servicer witness that adequately meets this personal knowledge requirement. As a consequence, I estimate that I, and the lawyers with whom I consult, win about 75% of the time by opposing these summary judgment motions based upon false affidavits. Yet the lawyers presenting these dishonest affidavits show no sense of shame when they lose, because in the 90% of the cases where they are unopposed, they win by default, collect their fees and go home happy. This failure to present honest and competent evidence arises not out of an inability to meet the requirements, but out of their stubborn refusal to devote the necessary resources to honestly comply with the rule.
You assert, “I am concerned with the stability of contracts, the rule of law, if they are abandoned at this fragile time in our economy.” But you imply that it is foreclosure defense lawyers who are jeopardizing the prized concept of “the rule of law” when they attack these improper foreclosure filings. These lawyers are performing the highest calling of our profession as they expose the blatant dishonesty of the nation’s largest financial institutions. None of our present knowledge about this outrageous and widespread phenomenon would have been revealed but for the efforts of the hardworking and ethical lawyers representing homeowners.
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So much do these institutions try to hide this dishonesty that GMAC Mortgage, LLC attacked me personally for exposing the abusive affidavit signing practices of its Limited Signing Officer, Jeffery Stephan. One of his many affidavits had been filed in a case in which I was representing a Maine homeowner, and the local judge accepted it as true. Thereafter, I deposed Stephan and revealed that he did not bother to read any of the affidavits that he signed, did not know whether they were true, and did not know they contained major errors. He even readily admitted that he did not appear before the notaries he supervised when they signed statements that he had personally appeared before them to be sworn. Stephan signed between 8,000 to 10,000 documents a month (not all were affidavits), and his affidavits were sent to courts all over the country. When I discovered this outrageous fraud, I shared the transcript of my deposition on a listserv with other lawyers from around the country who represent homeowners so that they could protect their clients from being victimized by his false affidavits.
GMAC Mortgage wanted to keep Stephan’s testimony under wraps so badly that it tried to obtain a court order to stop me from sharing it with other foreclosure defense lawyers, and it asked the court to fine me personally for what it called my “malicious dissemination” of the transcript. I was outraged by these efforts to intimidate and gag me, having never experienced such offensive conduct in my forty years as a lawyer. I fear that many younger or less experienced lawyers might have been cowed into silence by any similar efforts. Our judge did not hesitate to deny the GMAC Mortgage motion to gag and fine me and in one case imposed lawyers’ fees sanctions of over $27,000 against it for its bad faith filing of the affidavit from Stephan.
In the situation that I have just described, it is the “rule of law”, for which you express concern, which worked exactly as it should in revealing misconduct by one of our major financial institutions. Our judge here in Maine had no problem with finding the conduct of GMAC Mortgage to have been carried out in “bad faith”. When we showed the judge that GMAC had been caught in exactly the same conduct in Florida four years earlier, he stated, “despite the Florida Court’s order, GMAC’s flagrant disregard [of the law] apparently persists. It is well past time for such practices to end.” What I find so troubling about your article is that you fail to condemn either the loan servicers or their lawyers for their clearly unethical conduct in presenting false evidence to the courts. In your failure to condemn such conduct, you also fail to use the stature of the office that you once held to inspire other judges to confront and root out misconduct.
You minimize the now indisputable fact that the nation’s largest financial institutions have lied to courts in thousands of foreclosure cases. You raise no concern for the fact that our citizens’ trust in the judicial system has been deeply shaken by the revelation that our financial institutions have foreclosed upon hundreds of thousands of homes by the presentation of false evidence in courts all over the country. In the plea at the end of your article, “let us not sacrifice the rule of law and the sanctity of contracts in the process,” you imply that lawyers for homeowners are the ones at fault. But it so clearly is the banks, the trusts and their loan servicers who want to sacrifice the rule of law and who refuse to respect the sanctity of their contracts. They appear to have succeeded in far too many courts in obtaining special exceptions to our rule of law requirements. As a result, American citizens have been left to wonder whether they can receive fair treatment by our courts when confronted by large corporate adversaries.
Your expression of concern for our fragile economy suggests that you believe that the rule of law is a relative concept. You seem to suggest that it should be set aside when it comes to protecting homeowners in foreclosures in order to protect our recovery. One of the fundamental precepts of our Constitution is that the individual rights guaranteed by our laws must never be sacrificed. Due process of law is not a relative concept, it is an absolute. Our failure to preserve that concept is what led to the unconstitutional internment of thousands of Japanese Americans during World War II and must not be repeated here. There are no exceptions in the due process clause of the United States Constitution.
Finally, I must answer the implication in your article that there is a widespread practice among foreclosure defense lawyers of denying the existence of loan defaults when they are found. While you have been retired for many years, I have been working with many lawyers in actual foreclosure defense for almost three years. In addition, I am in constant communication with foreclosure defense lawyers all over the country. I have seen no evidence at all to support your assertion. While there will always be exceptions, I do not believe that there are widespread denials of defaults where they actually exist. What you seem to overlook is the fact that, even when defaults do exist, it is not only appropriate, but a matter of professional responsibility for a homeowner’s lawyer to challenge the standing of any party asserting that default when that party clearly lacks standing to seek a foreclosure, when it is unable to prove that it owns the loan that it is trying to foreclose upon, or when it is unable to prove that it has provided the homeowner with the contractually created right to a proper notice of default and the right to cure it.
I greatly respect the office that you held as a judge in our Federal court system. But I can neither agree with the discredit that you lay upon the foreclosure defense bar, nor can I understand your unwillingness, as one having extensive judicial experience, to explicitly condemn the conduct of loan servicers and their lawyers. I sincerely urge you to reconsider your remarks, to retract them, and to make a public apology to all of the private bar and legal servicer lawyers who are struggling so hard, often for low pay, to preserve the integrity of our judicial system against the rampant dishonesty of the foreclosure industry and its exceedingly well-paid lawyers.
Respectfully submitted,
Thomas A. Cox
Portland, Maine
November 26, 2010
Thomas A. Cox is a retired bank lawyer in Portland, Maine who serves as the Volunteer Program Coordinator for the Maine Attorney’s Saving Homes (MASH) program. He represents homeowners in foreclosure, and assists and consults with other volunteer lawyers in providing pro bono legal services to these Maine homeowners.
I’ve taken a particular interest in GMAC because in the one consumer foreclosure case I
‘ve attended, back in May, I had the dubious pleasure of seeing a GMAC employee and an attorney for the local foreclosure mill, who was also put on the stand, perjure themselves. And this isn’t my interpretation; documentary evidence was presented later in the trial that showed core elements of each of their testimony to be false. The GMAC staffer, who had made confident statements about the case and provided plenty of bromides about the integrity of GMAC’s processes, was suddenly reluctant to say anything more definitive than “I don’t know.”
A Birmingham, Alabama law firm, Bradley Arant Boult Cummings, has been GMAC’s national counsel on real estate servicing matters for some time (see here for examples of some of the matters it has handled).
Curiously, Bradley Arant is one of the firms that GMAC engaged to conduct an “independent review” after its use of robo signing became public:
GMAC Mortgage is initiating an independent review of foreclosures in all 50 states and examining foreclosure sales nationwide to ensure procedures and documentation are accurate….
The firms hired to conduct the review are Sullivan & Cromwell LLP, Bradley Arant Boult Cummings LLP, Morrison & Foerster LLP and PricewaterhouseCoopers LLP, said a person familiar with the matter.
Given Bradley Arant’s long-standing and extensive involvement in GMAC’s mortgage business, how can it legitimately be part of the team conducting the review? It’s incentives will be to minimize any problems, for a host of reasons, the most important being so as not to ruffle a big meal ticket and to avoid the exposure of any issues that might create liability for the firm.
But if that isn’t bad enough, get a load of this, courtesy Bloomberg:
Fannie Mae, the largest provider of mortgage financing in the U.S., said it halted referrals to a Florida foreclosure-processing law firm that’s being investigated by the state attorney general.
The Law Offices of David J. Stern PA have drawn scrutiny in Attorney General Bill McCollum’s investigation into the foreclosure of homes based on possibly fraudulent or improperly prepared documents….Fannie Mae, which has a $3.3 trillion book of business, has hired law firm Bradley Arant Boult Cummings LLP to review Stern’s processes and operations.
Why is this problematic? The profile of a typical foreclosure mill is a very high staff to partner ratio, as many as 90 to 100 paralegals for every partner. Their processes are routinized. Foreclosure mills are evaluated according to parameters set by Fannie and Freddie, in case of GSE securtizations. Most of this coordination and assessment does not take place directly, but via a firm called Lender Processing Services, which serves as a defacto outsourced manager on behalf of the GSEs and servicers.
It is hardly news that foreclosure mills in the LPS/Fannie/Freddie network were engaging in questionable conduct. Consider this June 2009 statement:
Attorney General Richard Blumenthal, as part of an investigation into the foreclosure business in Connecticut, has requested information from mortgage giants Lender Processing Services, Inc., Freddie Mac and Fannie Mae concerning their process for selecting law firms in foreclosure proceedings.
Blumenthal is investigating reports that a majority of Connecticut foreclosures are assigned to only a few select law firms, and complaints by consumers who said they did not receive proper foreclosure notices from marshals.
In letters to Lender Processing Services, Inc., the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae), Blumenthal said he understands that these organizations maintain a network of law firms that perform legal services relating to foreclosure actions…
“Dominance over foreclosure service by a few select law firms and marshals has spurred complaints about improper or illegal practices — wrongfully allocating work to non-marshals, forging papers, failing to serve papers, and making kickbacks,” Blumenthal said. “Concentrating this work in a few hands can be severely problematic — causing unconscionable costs and failed notice delivery. These companies — mortgage lending giants — have a public trust.’
Now how does this relate to GMAC and Bradley Arant? LPS and the mills they hire work in an integrated fashion. Moreover, Freddie, Fannie, and the servicers have chosen to work with firms that operate in a high-volume, highly standardized manner. Blumenthal clearly was of the view that Fannie and Freddie would bear some, perhaps a great deal, of responsibility for any improprieties, since the law firm was operating less independently than would normally be the case.
GMAC also used the David Stern law firm. Thus both due to its desire to deepen its relationship with Fannie and to keep itself and GMAC out of trouble, Bradley Arant is certain to frame its examination as narrowly as possible and not consider potentially troublesome but germane questions such as who at the contracting organizations (LPS, Fannie, other servicers) might also be culpable.
A broader look is key to understand who really bears responsibility. Foreclosures of securitized loans increasingly look to be what Bill Black would call a criminogenic environment, in which the major perps are deeply entwined and work together. And if caught, it is clearly in their best interest to cut loose the weakest, most dispensable actor in their tidy group, the foreclosure mill.
So in many ways, the selection of Bradley Arant makes perfect sense. It is familiar with the terrain, so it will be able to issue a plausible-sounding report. It is also so deeply part of this questionable backwater that it is highly unlikely to make a bottoms up investigation and potentially rock the boat.
As former central banker Willem Buiter remarked, “Regulation is to self regulation as regard is to self regard.” The only way for an investigation of this sordid business to succeed is for it to be truly independent, and that means requisitioned and executed by parties that have their hands clean. If any of these companies had a new CEO or a particularly tough compliance/internal audit function, they might fill that bill. However, the very choice of Bradley Arant strongly suggests that these examinations are exercises in form over substance.
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