by David Dayen
Michael devised a simple yet labor-intensive system for 4closureFraud, through his optimized Google Reader feed. He took in headlines from all major news sites and scraped the Web for stories tagged with several keywords (like “foreclosures” and “evictions”). This allowed Michael to find obscure reports that other people might miss. On February 13, WINK News in Fort Myers profiled an anonymous homeowner, “Mark,” who made a modified mortgage payment to Bank of America that they erroneously posted 40 cents short. As a result of BofA’s mistake, Mark was headed into foreclosure. A week later, an NBC affiliate in Moscow, Ohio, reported on a man facing foreclosure who decided to bulldoze his own home rather than give it to the bank. Only Michael was digging up all these random bits from local news affiliates or small-town papers, revealing the crisis at its most personal level.
But it took tremendous effort. All told, his Google Reader would reel in around thirty thousand new headlines every single day. And between waking up and going to bed, Michael had to scan every headline and mark them as read, getting thirty thousand down to zero. If he didn’t, the unread headline count would rise to fifty thousand the next day. Bloggers checked off their Google Reader headlines daily the way farmers cleared invasive plants. You had to cut back the kudzu constantly, or more would return. So it became an all-consuming demand, bigger than Michael’s job at Toyota, bigger than his family, bigger than everything. It weighed on his brain while he slept, and hung over his every move while awake. And out of those thirty thousand headlines a day, Michael would pull maybe three stories.
As the site grew, Michael annotated posts with images, though his graphic design skills were fairly crude. Someone named Howard Davidson contacted Michael and offered to build graphics, from parodies of bank logos to clever-looking Photoshops (one altered a For Sale sign to say “No Sale by Owner—Clouded Title”). Later Michael met Howard in New York and discovered that Howard was a woman. She was in foreclosure and didn’t want to reveal her identity, even to Michael, but the graphics allowed her to make a contribution to the cause.
Michael didn’t just aggregate local foreclosure horror stories. He published dodgy documents, recent court opinions, and his own research. He briefly featured a “Foreclosure Fraud of the Week,” taking ten Palm Beach County foreclosures at random and picking the one with the most fraudulent documents. (The winner the first week had an allonge with an obviously Photoshopped endorsement. The signature had a looping y that dipped below the line, at which point the line disappeared.) He would track down authors of interesting rants or opinion columns and ask permission to cross-post. One of the first was Sam Antar, the former CFO of Crazy Eddie, who served jail time for fraud and penned inside stories about how he ripped off the public. Another was Matt Weidner.
Matt and Michael maintained a healthy rivalry, competing to be the first to post key depositions or rulings. They shared many sources, so the race to publish would often involve being in the right place at the right time. Matt had an employee in his office handle the blog when he was away from a computer. Once when Matt was on vacation, a juicy filing came out, and he frantically struggled to call his office while driving, imploring the blog minder to throw it on the site. Lisa would sometimes forward documents she found, copying Michael and Matt. Michael would call Lisa and say, “Can’t you just send things like that to me first?”
At its height, 4closureFraud received half a million unique visitors a month, modest compared to the New York Times but substantial for a niche website. And there weren’t just one or two sites but a network, a foreclosure fraud blogosphere. Michael had 4closureFraud; Lisa had Foreclosure Hamlet; Lynn had Fraud Digest. There were blogs by lawyers like Matt Weidner and Mark Stopa (stayinmyhome.com). There was Martin Andelman at Mandelman Matters and Jack Wright at MSFraud and Mike Dillon at the Home Preservation Network and Denise Richardson at GiveMeBackMyCredit.com, all of whom had been around for years. There were newcomers like Damian Figueroa, who started Stop Foreclosure Fraud after Project BOGUS, and Virginia Parsons at Deadly Clear. On really big stories, finance blogs like Karl Denninger’s Market Ticker or Zero Hedge or Naked Capitalism would jump in. The bloggers amplified each other’s posts, so one site’s reach wasn’t limited to its own readers but could spread throughout the entire network. Everybody read and gained insights from each other. They weren’t officially working together, but they operated like a team.
Once Lisa welcomed more visitors to Foreclosure Hamlet, she knew she had built exactly what homeowners fighting foreclosure needed. Americans have what counterparts in other countries might call a curiously personal attachment to their homes. They don’t see it as just a domicile, or as collateral against a promise to pay. The home is a repository of memories, an investment in financial security, and a reflection of self-worth, all wrapped into one. The home is where their kids learned to walk and talk, where they signified their commitment to marriage and family, where they exemplified their arrival to friends and neighbors. One Foreclosure Hamlet reader wrote Lisa of his deep affection for the tree in his backyard, which held a swing he used as a child. He couldn’t lose his home any more than he could lose his heart. For him and so many others, Foreclosure Hamlet represented the most important resource in the world.
The site’s best asset was its community. Paralegal Alina Virani was a constant presence, highlighting new cases and legal strategies. Ronald Gillis, a notary from Port Charlotte and a pro se litigant for three years, hung out at the site and would drive 150 miles to attend the happy hours. Andrew “Ace” Delany, one of the moderators, always left positive comments. Like Ace, Paul Muckle also hailed from Massachusetts. As a pro se plaintiff, he filed a lawsuit against every sitting governor and Presidents George W. Bush and Obama, arguing that mortgage abuse violated the Fourteenth Amendment to the Constitution. He sought no monetary damages, just a cease-and-desist order on every foreclosure in America. Muckle uploaded several videos about property rights, much of the information pulled from an eighteenth-century manuscript he found in his house. He also posted alien videos.
Kim Thorpe, a stay-at-home mom from Harrison, Maine, went by “KT.” She posted a comment on Living Lies late one night, explaining how the local sheriff handed her foreclosure papers even though she never missed a mortgage payment. The first response came from Ace, recruiting her to Foreclosure Hamlet. She joined up in March 2010 and never left.
After the victory on the motion to dismiss for lack of prosecution, Lisa wanted to follow up by sending sixty-day notices on dead dockets all over the state. Lisa even checked with the Florida bar, making sure she could continue to file as an “interested person” and not get sanctioned for unlicensed practice of law. In the meantime, she paid to have Palm Beach County run a report on all cases with no docket activity for over ten months. Andrew Delany called other counties, but they wanted cash up front to produce the report. When Palm Beach County’s data came back, they found thirteen thousand cold cases. So just sending a notice to each party would cost tens of thousands of dollars. Lisa needed a grant to get the project off the ground, but it never came together. In fact, Lisa was about to lose a source of income, not gain one.
She could not concentrate anymore. Previously a hard worker, she performed her nursing duties less capably, preoccupied with foreclosures and unendorsed notes and fabricated assignments. Projects filled her head: letters to public officials, requests for grant assistance, lists of documents to examine. Many days Lisa would stop in the small chapel before work and look up at the ceiling, whispering, “I need some guidance here.” She felt impossibly entangled in a strange world. Returning to a normal routine would be like climbing back up the sheer sides of a deep hole. Oncology nursing was a good job at a time when there weren’t many good jobs available. But though Lisa didn’t know where her foreclosure obsession came from, she finally decided she had to see it through.
She went to management and told them she wanted to take a leave of absence. An administrator asked her if she was experiencing menopau
se, and she said no. “This is a huge story and I have to work on it,” she told them. The practice had always accommodated her requests: they gave her maternity leave in 2007 and sick leave for Jenna in 2009, and they let her restructure her schedule to a four-day work week. And it initially looked like they would accommodate her again. Lisa trained her own replacement before the leave of absence. But in March 2010, before she officially left, she was fired. The cancer center never gave a reason; Lisa believed they wanted to save a buck instead of paying two nurses for one job. Under Florida law, fired workers were ineligible for unemployment. Lisa checked her savings and made some calculations. Stopping payment on the Gazetta Way mortgage in 2008 allowed her to rebuild savings; if she cut way back, she could use the money to keep herself and Jenna fed for a while.
Lisa had gone from married and employed to no husband and no job in just over a year. And yet she was doing exactly what she wanted.
Lynn Szymoniak, along with co-counsels Dick Harpootlian and Ken Suggs, filed a class action lawsuit in U.S. District Court in Florida on February 17, 2010, on behalf of four plaintiffs picked up through newspaper ads. Michael posted the complaint on 4closureFraud, of course. Lynn sued two trustee banks, Deutsche Bank and U.S. Bank, and their third-party document fabrication providers, Lender Processing Services and DocX, for violations of the Fair Debt Collection Practices Act. The complaint distilled Lynn’s six-week whirlwind of research to twenty-nine pages. She summed it up succinctly: “The entity seeking to foreclose can never prove the chain of ownership.” That was the original sin, the failed securitizations that broke chain of title by neglecting to transfer notes and mortgages to the trusts. The document fraud merely covered this up.
Though filed on behalf of only four plaintiffs, the lawsuit asserted that the class action could include thousands of similarly situated homeowners. The complaint sought damages incurred in the foreclosures plus the maximum allowable $1,000 per class member in statutory penalties, along with attorney’s fees. More important, Lynn hoped, a successful class action would bar trustees from foreclosing with false documents.
The case was assigned to William Zloch, the most conservative judge in the Eleventh Circuit. Dick and Ken were wary of trying the case in front of an ideologue, but Lynn said, “Maybe that’s who we want! He sentences harshly in white-collar cases!” However, presumed allies at the National Association of Consumer Attorneys went ballistic, screaming at Lynn on the phone for days, calling her unsophisticated in consumer law and bound to lose. Lynn figured these consumer lawyers wanted to protect their turf from well-heeled attorneys like Dick and Ken. Finally Lynn got a message from a legal services office in Chicago: “I hated to do it, but you didn’t return my last two calls, so I just filed a bar complaint against you.” Lynn hadn’t received a bar complaint in thirty years of practicing law. She called the man back to yell at him. He replied, “You don’t know what you’re doing!” The attorney explained that an unreported Eleventh Circuit case held that the Fair Debt Collection Practices Act didn’t apply to banks. He said Judge Zloch would take the opportunity to extend that to servicers and trustees. “You’re going to screw us all!”
Lynn found the unreported case and broke the news to Dick and Ken. Luckily, they were able to withdraw the case before the judge entered orders or served anyone. The worst part was calling the plaintiffs, homeowners in the middle of foreclosure, and telling them that the case had to be dropped.
The timing was excellent in one respect. As a public company, Lender Processing Services needed to submit a financial statement to the Securities and Exchange Commission, disclosing any legal actions against them. The company must have turned its statement in after the class action was filed but before it was dismissed. “The complaint essentially alleges that the ‘industry practice’ of creating assignments of mortgages after the actual date on which a loan was transferred from one beneficial owner to another is unlawful,” read the disclosure. “The complaint also challenges the authority of individuals employed by our document solutions subsidiary to execute such assignments as officers of various banks and mortgage companies.” LPS added that they identified an unspecified “defect” in the notarization of certain documents from DocX, and claimed to be working on rectifying it. But this was the real bombshell: “Most recently, we have learned that the U.S. Attorney’s Office for the Middle District of Florida is reviewing the business processes of this subsidiary,” referring to DocX.
That was Lynn’s case out of Jacksonville. In fact, she learned that a grand jury had been empaneled, because whenever she gave her contacts the name of someone who might have new information, they would immediately respond, “Would they be willing to speak to a grand jury?” Lynn’s friend Tommy, the insurance fraud investigator who partnered with the FBI on these cases, also knew how to slip Lynn hints of progress. He would say things like, “I can’t talk this weekend—some stupid woman is making me go to Alpharetta, Georgia,” the home of DocX. All the prosecutors in the U.S. attorney’s office boasted about how everyone associated with this scheme would go to jail. Lynn even learned that DocX moved its operations out of Alpharetta and into the main LPS headquarters in Jacksonville, fleeing the scene like burglars after a heist.
One person willing to speak to the grand jury was Nye Lavalle. After the happy hour, he called up Lynn and asked to take her to lunch. “You and I seem like we’re working on the same things,” he said. They went to Lynn’s favorite restaurant in City Place, a multistory outdoor mall in downtown West Palm Beach. Within ten minutes Nye took photos out of his wallet. “I want to show you my new girlfriends,” he said to Lynn, pointing to a picture of him with two women young enough to be his daughters. Lynn smirked. They talked about the various investigations they had embarked on. “What I’m really involved in is filing claims,” Nye said. “But I can’t talk to you about it here.”
“At City Place?” Lynn said.
“I mean I don’t want to talk to you about it within the boundaries of the United States.” Nye proceeded to ask Lynn to accompany him on a boat into international waters, saying it would protect them from charges of conspiracy.
Lynn took about half a second to politely decline. Foreclosure fraud made her crazy, but not that crazy.
Lynn also kept up with Damian Figueroa, the homeowner from the happy hour. When Lynn was searching for plaintiffs on the class action that later fell apart, she sent Damian a retainer agreement to act as his lawyer, which he happily signed. Stuck with a dead case, Lynn thought she could still represent Damian in a class action against his plaintiffs, the David J. Stern law firm and MERS; neither of them was a bank, so the Fair Debt Collection Practices Act stumbling block might not apply. But she’d have to sell the lawyers with the cash on it.
Damian asked Lynn about filing something he heard about, called a qui tam action. “Here is the problem with the qui tam,” Lynn emailed back. “The VICTIM must be the government—as a plaintiff, you stand in the shoes of the government that has been defrauded. The government is a victim as it is financially investing in these over-valued securities—but we both know that the homeowners are the real victims.” The other problem with a qui tam, which could be pursued under a federal statute called the False Claims Act, is that the relator—the plaintiff who acts on behalf of the government—must have knowledge unknown to the general public. Lynn’s information came from publicly recorded documents, and deciding whether they were “known to the general public” would be up to a judge. Dick Harpootlian and Ken Suggs did suggest a qui tam case, with Lynn as the relator. She mentioned this to Damian, and threw out the possibility that they could file together. Damian was willing to co-file. The two continued to exchange information; by this time, Lynn had a coterie of pen pals and collaborators from all over the country, helping her build a body of evidence.
Lynn had her own foreclosure case to worry about. She filed for sanctions against Marshall C. Watson, the foreclosure mill, for fabricating evidence. She also wanted to depose Linda Gr
een and her DocX bosses. Mark Cullen, her lawyer, encouraged her to go to the courthouse and watch foreclosure cases, mainly so she could understand her chances of success. “You’ll see—they will give you thirty seconds, and you’ll lose.”
In the courtroom, Judge Meenu Sasser dispatched cases at almost precisely that rate. Lynn focused on the handful of homeowners in the room. They all looked tired, as though they had been in this fight for so long it would almost be a relief to see it end. Being in foreclosure took a physical toll on homeowners, a daily puncturing of their already reduced self-esteem. Activists heard constantly about stress-induced illnesses, heart problems, depression. You could read it on people’s faces.
Lisa ran into Lynn in the courtroom. Every time a plaintiff’s lawyer would move to drop the lost note count and claim that they found the note, Lynn would say “liar” under her breath. Lisa just laughed. It kept happening, case after case. Found note, found note, found note. If Judge Sasser considered this unusual, she didn’t let it show.
After the session gaveled to a close, Lisa told her new friend about how she would drive around the alphabet streets in Lake Worth, looking at boarded-up homes. “There are streets like that in Palm Beach,” Lynn replied. They got in Lynn’s car and drove to Pinewood Avenue, just a couple of miles away, literally across the train tracks from downtown. The homes were one-story ranch-style models built in the 1920s and 1930s, and their current state revealed the passage of time. Many still had the antiquated wiring and plumbing from the original installation; none had central air conditioning. Yet Lynn found sales in this area as high as $250,000 at the height of the bubble. Nearly all of the mortgages from these homes were securitized and put into trusts, and now few of the properties were inhabited.