by David Dayen
But when Lisa called back later to make the appointment, the office had no recollection of a June Clarkson. She left messages and never heard back. The brief hope had been extinguished. “They acted like I was some kind of crazy person,” she told Michael. “I mean, all right, so I’m a little different, but I’m not crazy!” Michael turned to the possibility that Cullaro quashed the investigation and that Lisa was now being targeted. “We have to be careful,” he said.
Meanwhile, Michael tested his newly won fame by contacting Susan Martin of the St. Petersburg Times again. He forwarded her links to the guide he had created, the pickup from Karl Denninger and other websites, and his presentation at the Living Lies conference. “Perhaps this information, growing in acceptance and renown, would be of more interest to you now as a true investigative journalist who has published articles denouncing foreclosure fraud,” Michael wrote.
Susan Martin wrote back, thanking Michael for the links. But her tone had changed since the summer. “My problem with all this, however, is that too many distressed homeowners are jumping on these ‘foreclosure defense’ tactics thinking that they will be able to save their homes when in reality they are just prolonging the inevitable,” she wrote. She criticized lawyers who asked for too much money from homeowners, as well as pro se litigants with their incoherent, “frankly ridiculous” motions. These were practical points—homeowners were paying lawyers when they could pay down their debts—but to Michael, it ignored the widespread fraud Martin herself had documented.
What really got to Michael, though, was this statement by Martin: “Frankly, too, it is extremely complicated to write about for a daily newspaper of general circulation.” She was implying her own readers were too stupid to understand foreclosure fraud, and it wasn’t worth the effort to get them to understand.
“It’s too complicated to write about in a newspaper?” Lisa raged in an email. “The news is ‘TOO COMPLICATED’? WAS 9/11 ‘TOO COMPLICATED’? WAS THE EARLY STAGE OF THE HIV EPIDEMIC ‘TOO COMPLICATED’? WAS WATERGATE ‘TOO COMPLICATED’?”
Michael shrugged it off. “On to the next arena.”
Lisa saw the problem not as stupidity but as ignorance, and thought that ignorance could be reversed. After attending court hearings for months, she was convinced that judges weren’t paying attention to the fraud. Lisa had no access to judges, but attorneys had the respect of the court, what with their diplomas and fancy initials after their names. If Lisa could teach them about the fraud and have them teach the judges, they would get more of a hearing. And everything would get resolved.
If it sounded deceptively simple, that’s probably because it was. Lisa and Michael’s lack of experience with political and social movements allowed a certain naïveté to creep in. They were appropriately cynical about Wall Street’s land grab depriving millions of a basic human need and profiting massively off economic dislocation, but they had no problem thinking they were just a few allies away from fixing it. Moreover, they believed that if someone in power prevented banks from using fraudulent documents, their sharp executives would surely devise a reasonable solution that gave people a fair shot at saving their home. And then Michael and Lisa could go back to their lives.
Lisa had met a number of attorneys at the Palm Beach County courthouse. Most of them came out of real estate law and weren’t trained trial lawyers, with no grasp of the epidemic of fraud or how to present it to the court. Whenever she showed attorneys false assignments and notarizations, they reacted with total shock. Instead of instructing them one by one, Lisa wanted to bring them together in one space. She envisioned an informal gathering where foreclosure victims and lawyers could have a few beers, discuss the issues, and maybe spark something more, without the intimidation factor of a lecture. The shame and humiliation attached to foreclosure demanded safe spaces, where people desperate to hide their financial catastrophe from the neighbors would feel comfortable unburdening themselves and sharing their stories. She wanted an offline version of her Foreclosure Hamlet chat room: a foreclosure fraud happy hour.
At the courthouse, Lisa started to approach lawyers she knew, asking them, “If we had a get-together, would you come?” The lawyers, almost all men, would always respond the same way: “Are there going to be any women there?”
Lisa would answer, “Hey, I’m a nurse, I’ve got women!”
So the first step in the movement to expose the largest consumer fraud in U.S. history resembled a matchmaking event for young professionals. Lisa chatted up her single nursing friends, who were happy for the chance to meet successful potential mates. That was the origin of the Nurses’ Coalition Against Homelessness, official sponsor of the foreclosure fraud happy hour.
Lisa called Michael and said, “I have a crazy idea.” The only problem was that she knew nothing about the local drinking scene. “I don’t think I have ever gone to a bar by myself in my life.” Fortunately, Michael’s instinct about the two of them having complementary skills was accurate—he spent plenty of time at happy hours.
He immediately thought of the perfect location: E.R. Bradley’s Saloon. The huge, beachfront-style bungalow with the bright green canopy in downtown West Palm Beach faced the Intracoastal Waterway and the marina yachts. The outdoor tables were protected from the sun by umbrellas made of old palm fronds, the kind of thing Jimmy Buffett would write a song about. Almost everyone in the area knew Bradley’s, especially the legal community, since it wasn’t far from the county courthouse. Lisa and Michael talked to the manager, and he offered half-price appetizers for the event. The drink prices were a little high, but Michael considered Bradley’s welcoming vibe enough of a draw to attract people.
Lisa and Michael promoted the happy hour in true grassroots fashion: with flyers at Starbucks. Jim Chambers, a Foreclosure Hamlet regular, made the flyers. In fact, visitors to Lisa and Michael’s websites became unpaid volunteers for the cause, using fax machines to spread the information to area law firms. The first happy hour was scheduled for November 18, 2009.
A few days before the happy hour, a homeowner emailed Lisa with a question. The bank hadn’t moved on her case in nearly a year, and she wanted to know how she could get it out of the court system. This was a common query—lots of people experienced long delays, with the banks making no effort to foreclose. It caused tremendous stress, because homeowners never knew when they would have to find somewhere to live or scrounge up a security deposit. For all the claims by banks about “improper” defense motions clogging up the courts, their inaction had much more to do with it.
Lisa thought the homeowner raised an interesting question, so she set out to find the answer at the county courthouse. While riding the escalator to the fourth floor, she approached the man in front of her, whose suit gave him away as an attorney. “Are you a lawyer?” she asked. The man’s eyes nearly bulged out of his head at the prospect of having to listen to some civilian’s horror story.
“Don’t worry, I don’t want legal advice,” Lisa said, “I just have a question.” The man relaxed, and Lisa continued. “If a bank files a foreclosure case and doesn’t do anything to it, is there a way to take it out of the court system?”
The attorney looked at Lisa. “Come with me.”
They ran down two floors into the law library, which was filled with recitations of Florida statutes and case law. The lawyer pulled out a book and flipped through the pages. He came to a stop and said, “This refers to exactly what you were talking about.”
According to rule 1.420(e) of the Florida court rules of civil procedure, if there’s been no docket activity on a case for at least ten months, any “interested person,” whether party to the case or not, can file a notice of lack of prosecution. “You have to send a certified copy of that notice to all the parties in the case,” the attorney said. “And if they still don’t file anything in sixty days, you can set a hearing for dismissal. And the judge has to dismiss it. Says it right here—the action shall be dismissed.”
Lisa discovered he
r newest project.
She did some research, finding Chemrock v. Tampa Electric, an opinion out of the Florida First District Court of Appeals. Tampa Electric filed a motion to dismiss for lack of prosecution, under rule 1.420(e). Within sixty days, Chemrock filed a motion in opposition to the motion to dismiss for lack of prosecution, but the district court sided with Tampa Electric and tossed the case. The appeals court ruled that any filing in the sixty-day grace period would have to be “an attempt to move the case toward conclusion on the merits,” not just a dummy motion to restart the clock. Everything checked out: not only the rule but case law supporting it.
Lisa called up Michael and said she wanted to run reports throughout the state for all cases with no docket activity for ten months, and then file motions en masse. Maybe they could get local law school students to help, telling them that if they wanted to acquire experience, this was a way to appear before a judge and get a case dismissed. “This is it,” Lisa enthused. “All we need is a practice case to see how this goes.”
A couple of days later, Michael told Lisa that he found the practice case. His receptionist at the Toyota dealership had a daughter, Tami Savoia, who was in foreclosure on a home in Greenacres, southwest of Palm Beach. Tami and her husband actually abandoned the home in 2007 and moved to North Carolina, but the case, brought by U.S. Bank (as trustee for First Franklin Mortgage Loan Asset-Backed Certificates, Series 2005-FF7), was still in the courts, lying cold. Michael asked the receptionist if they could give this motion a try, and she handed over the keys. Lisa filed the notice that month:
PLEASE TAKE NOTICE that it appears on the face of the record that no activity by filing of pleadings, order of court, or otherwise has occurred for a period of 10 months immediately preceding service of this notice, and no stay has been issued or approved by the court. Pursuant to rule 1.420(e), if no such record activity occurs within 60 days following the service of this notice . . . this action may be dismissed by the court on its own motion or on the motion of any interested person. . . .
Lisa Epstein, Interested Person
Lisa added a “Suite 508” to her apartment address to make it look official. She mailed the notices and marked off sixty days on her calendar, waiting for a response.
After a classic Florida sunset, a nearly full moon shone over E. R. Bradley’s on November 18, 2009. Lisa and Michael arrived first to set up and corral guests. And it went pretty well. The lawyers showed up because of the nurses, the nurses showed up because of the lawyers, and several foreclosure victims stopped by. These were people who knew one another only by aliases they used on the Internet. Intellectually, they knew others were out there, but meeting them in person confirmed they had allies in the fight.
James Elder called himself “Jazzy” on Foreclosure Hamlet; he met Lisa at the courthouse. His auto repair business was literally blown away by Hurricane Wilma in 2005, and his wife later fell ill, stressing the family finances. PNC Bank put James into foreclosure while negotiating a loan modification. Foreclosure mill law firm David J. Stern backdated the assignment of mortgage; it wasn’t filed until 2009, but the date of assignment was listed as 2005, a bungling attempt to cover up the post-foreclosure production of the document. Grace Rucci’s son got the same message from Chase Home Finance that Lisa did: stop paying for three months and we’ll give you a modification. He did, and Chase put him into foreclosure. Grace, a home health care worker, got activated by Lisa’s website. Dave Lehoullier, Lisa’s tech troubleshooter at Foreclosure Hamlet, came down, too. In all, about thirty people made it, which Lisa and Michael judged a success for a couple of weeks’ notice and a whirlwind campaign of posting flyers on every utility pole and faxing every foreclosure defense and bankruptcy attorney in south Florida.
The big topic that week concerned the lending industry’s comments to the Florida Supreme Court’s task force on foreclosures. The Florida Bankers Association bluntly stated, “Virtually all paper documents of the note and mortgage are converted to electronic files almost immediately after the loan is closed. . . . The reason ‘many firms file lost note counts as a standard alternative pleading in the complaint’ is because the physical document was deliberately eliminated to avoid confusion immediately upon its conversion to an electronic file.”
This was an amazing admission. First, the pooling and servicing agreements for the securitization trusts explicitly stipulated that only notes and mortgages with “wet-ink signatures”—that is, original documents—would make a transaction valid. The Florida Bankers Association unwittingly admitted that, as a matter of course, these original documents were never delivered. Second, for months Lisa watched lost notes become miraculously found whenever plaintiffs were challenged to produce them. This happened in Lisa’s own foreclosure case, with the “original note” conjured up months after the foreclosure action. How could they be found if they were destroyed? Either the Florida Bankers Association was lying or the notes were fraudulent.
Robert Bostrom, executive vice president at the mortgage giant Freddie Mac, made an even blunter statement in a comment that Michael found: “Typically, the plaintiff in a foreclosure action does not own the underlying note or loan that is secured by the property subject to the foreclosure proceeding.” This is precisely what Michael had spent the better part of a year trying to prove! Information of this nature would acquit a shoplifter. If the chain of custody of evidence cannot be established and the prosecuting attorney cannot produce the stolen items, the case falls apart. And this was not a bottle of nail polish but someone’s home, the store of most of their wealth.
Michael and Lisa encouraged defense attorneys to introduce these comments in their cases. And they wanted to prove that victory was possible against the banks, despite their power and prestige. So they ticked off a series of recent wins. Homeowner Antonio Ibanez just reversed his foreclosure in Massachusetts, after U.S. Bank failed to execute the assignment of mortgage until after the foreclosure sale. Federal bankruptcy judge Robert Drain canceled a $460,000 mortgage debt for a borrower in White Plains, New York, because PHH Mortgage couldn’t prove their claim. Even a bankruptcy judge in Idaho objected to an incomplete chain of title routed through MERS. Defense attorneys hadn’t entered law school to facilitate the Great Foreclosure Machine, so they were eager to pick up new strategies to fight back.
People broke off into their own groups, but Lisa and Michael made sure to talk to everyone. The happy hour lasted all night. For a brief moment lawyers and homeowners were actually working together to solve the problem. Though Lisa and Michael planned to skip December because of the holidays, they hoped the happy hours would build momentum when they resumed in January.
A couple of days later, Michael got an unexpected call from Nye Lavalle. The same guy who blew Michael off several months before was now asking to collaborate. They met for drinks one night in Delray Beach and compared notes. Michael thanked him for leading the way, and Nye praised Michael’s guide to looking up fraud. “We didn’t have records online when I started out doing this,” Nye told him. “I had to go to the courthouses one by one.” Michael told him about the happy hours, and Nye said he would try to make them whenever he was in town. Michael drove back to Port St. Lucie that night thinking he had been let behind the velvet rope into an exclusive club.
Meanwhile, Dave Lehoullier, Lisa’s tech guy at Foreclosure Hamlet, decided to throw a get-together for activists at his home, which he called “The Ranch.” Michael and Lisa attended, along with a few others. They talked a bit about foreclosures and documents, but more about themselves and what brought them to this point. “I don’t know what I’m doing half the time,” Lisa confessed. But she was compelled forward, she said, by the same impulse that led her to become a nurse. Then she told a story that nobody, not even Michael, knew. Lisa happened to be visiting New York City as a tourist on September 11, 2001. When news of the planes flying into the Twin Towers broke, she ran to help. Within a matter of hours, Lisa found herself in a triage center in lower Manh
attan, tending to victims of the attacks for a couple of days. That’s what she was doing now, she said—providing triage to those suffering from foreclosure.
Everyone left The Ranch that night a little closer to their compatriots. But they were wrong about one thing. They kept framing the goal as educating attorneys about the sorry state of the public records, as if no lawyer had it figured out. At some level they understood that was wrong; there wouldn’t be any positive developments to tout if there weren’t some attorneys out there trying cases. But Michael and Lisa didn’t know about a robust coalition of lawyers—a giant virtual law firm—challenging lenders. Some had been doing it for decades. The activists, not the lawyers, needed to be educated.
9
THE NETWORK
April Charney did it first in 1992. A Miami native with long jet-black hair who shuttled between Florida and Arkansas in her legal career, she had just started working at the nonprofit Gulfcoast Legal Services in Sarasota. April’s humility was evident in who she chose to defend. Back in Arkansas, clients would pay with money carried in their boots, which they withdrew from the “bank”—their backyards. In Sarasota, April represented many renters improperly evicted from apartments. But this was a home mortgage case.
All mortgages have language entitling homeowners to special delinquent servicing prior to foreclosure. Once a borrower misses a payment, the loan servicer must contact them with a delinquency letter, advising the borrower of the amount due and how to cure the problem and bring the loan current. That letter must arrive within forty-five days of the missed payment. Servicers must take partial payments and cannot begin foreclosure until the window for the borrower to fix the default closes. Borrowers fund this servicing entitlement themselves through part of their mortgage payments. On Veterans Administration or Federal Housing Administration loans, special servicing directives are even more stringent.