Chain of Title

by David Dayen

  Michael wrote a gushing reminiscence of the convention seminar:

  I never thought that being in Foreclosure could be so invigorating and rewarding. . . .

  Since I started this process over TWO years ago, I have done things I would of [sic] never thought possible. I have met people who are so real/true to themselves/passionate on what is right and what is wrong . . . and have come to a realization of it is not about me anymore. It is about making a difference in this crazy corrupt world we are living in.

  Now, this is never who I was. For the most part, I never really gave a hoot about anyone else. Now I find myself addicted to helping/educating/networking/sharing with anyone and everyone who will listen, hell, I try to do all that even if they don’t!

  A few days after the convention, Lisa was with Jenna in the Palm Beach County courthouse as the foreclosure division took a midday break. She was packing up when Judge Sasser approached her. “Is that your daughter?” Sasser asked, motioning to Jenna, who was lying flat on one of the benches.

  “Yeah, that’s my little love bug.”

  Judge Sasser asked if Jenna had a medical condition, and Lisa explained her spina bifida surgery and the rehabilitation process. The judge nodded. “I know what it’s like to have a child with medical problems.” In fact, the judge told Lisa, she had lost a child.

  16

  DOWNFALL

  As the Florida judiciary and attorney general’s office grew skeptical of the Great Foreclosure Machine, the state legislature had other ideas. Instead of the aborted plan to push foreclosures out of the courts, lawmakers authorized $9.6 million to bring back retired judges, with the stated goal of reducing the backlog of roughly half a million foreclosure cases by 62 percent within a year. If foreclosure divisions were pursuing a “rocket docket” before, the legislature supercharged it to break the speed of sound.

  The only way to unload cases in the manner the legislature decreed was to finalize summary judgments as fast as possible. Accuracy of the evidence became a secondary consideration. In July alone, Orange and Osceola Counties completed 1,319 cases, the chief judge for the area boasted to the Florida Bar News. Palm Beach County’s chief judge maintained that courts had to “clear the foreclosure cases so that vacant and dilapidated homes can go back on the market.” Of course, there were no buyers for distressed homes in moribund Florida, and lenders didn’t like to pay for maintenance; the likely outcome of flushing foreclosures through the courts was more properties in ruin.

  Lisa and Michael got reports from the trenches. Two-minute trials were reduced to twenty seconds. Judges routinely declined to read the case file. One retired judge in Miami-Dade denied dozens of requests to stop foreclosure sales, actually saying out loud, “What is this HAMP that these people keep claiming they are approved for,” unaware of the federal government’s signature loan modification program. Another judge in Palm Beach lectured from the bench, “I know all about sickness, I know all about divorce, I know all about anything else,” commanding that homeowners stop making excuses for nonpayment (excuses by banks for noncompliance with the laws of evidence were still allowed). Attorney Mark Stopa saw a judge in one of his cases file final judgment before the hearing. Other summary judgments were entered without informing the homeowner.

  With no courtroom space, hearings were held wherever a free spot could be found: judge’s chambers, a conference room. In Broward County they did it in the hallway. A judge there told a homeowner her job was to “dispose of cases,” refusing to stop a foreclosure even after the borrower and lender agreed to postponement. Because the retired judges were paid specifically to reduce caseloads, they had a financial incentive to dispossess people.

  This was wonderful news for the Great Foreclosure Machine. Document processors got additional business manufacturing mortgage assignments and note endorsements. The foreclosure mill law firms who hired them pumped out cases and earned fees faster. Servicers who hired them recouped their fees upon foreclosure sale. Trustees finally got troublesome loans off their books, pinning losses on investors. And evidence of the whole scheme—securitization FAIL, violations of tax and securities laws, broken chains of title, and invalid standing to foreclose—could be buried, shoveled over by retired judges cashing a check to bang their gavels and say no a lot.

  Worst of all, Lisa heard that the courts didn’t want anyone watching this embarrassing violation of hundreds of years of civil jurisprudence. Signs on the doors of the makeshift courtrooms said that only parties to the cases and their attorneys could attend; critics claimed that violated the First Amendment. April Charney snuck Rolling Stone journalist Matt Taibbi into a conference room/courtroom in Jacksonville. The presiding judge, A.C. Soud, bragged to a local paper that his job was to finish twenty-five cases an hour (even though in the very first motion Taibbi saw, the plaintiff both claimed ownership of the note and admitted that it was lost, all in the space of a few paragraphs). Taibbi tried to talk to a homeowner after the session ended, and Judge Soud called everyone back into the room, lecturing that nobody should talk to the journalist. April got an email an hour later from Judge Soud, threatening her with contempt for bringing in a reporter to observe.

  Lisa couldn’t fathom that the situation in the courts could ever get worse, but it did. Judges with actual experience hearing foreclosure cases were incensed about their courtrooms being turned into crime scenes, but homeowners had to hit the lottery and draw the right magistrate to receive anything resembling justice. Saddest of all, retired judges appealed to a twisted sense of fairness, denouncing homeowners who got to stay in houses “for free.” That perceived benefit, a side effect of lenders failing to follow established legal practices, trumped the rule of law.

  Lisa contacted Laurence Tribe, the well-known Harvard law professor (he taught President Obama), who was serving as “senior counselor for access to justice” at the Justice Department. Tribe’s portfolio at DoJ focused on the challenges of providing legal services to the poor, but Lisa stressed how the rocket docket denied due process. To her amazement, an associate named Daniel Olmos emailed her back, and in September they had the first of several conference calls. Olmos followed up with requests for information on the rocket docket and foreclosure mill misconduct. Tribe had clout, Lisa thought, so she jumped on the information requests.

  In darker moments, Lisa wondered whether she would ever make a dent in stopping a broken justice system. But the rocket docket would soon seize up, not because Florida suddenly recognized the damage it was inflicting but because foreclosure fraud would finally burst into the public consciousness.

  4closureFraud routinely posted depositions from mortgage industry employees across the country, whether document processors like Nationwide Title or foreclosure mills like David J. Stern. But the two that cracked the case involved robo-signers who worked directly for mortgage servicers: Jeffrey Stephan and Beth Cottrell.

  The Stephan revelation originated years earlier. Jim Kowalski was a straight-arrow assistant state attorney prosecuting homicides and sex crimes until 1996, when he moved to the defense side, joining a small firm in Jacksonville specializing in consumer fraud. In 2005 Kowalski’s client Robert Jackson paid his mortgage with a certified cashier’s check. GMAC Mortgage, initially the financing arm of General Motors but subsequently America’s fifth-largest mortgage servicer, returned the cashier’s check for insufficient funds. That’s impossible: you pay for a cashier’s check up front. Jackson received a foreclosure notice, along with an affidavit in support of mortgage indebtedness. As a trial lawyer accustomed to seeking discovery, Kowalski wanted to depose the person who signed the affidavit.

  Her name was Margie Kwiatanowski, from Hatboro, Pennsylvania. Kowalski went up to take her testimony, and it became obvious within a couple of minutes that she knew absolutely nothing about the case. Despite signing a sworn statement certifying the veracity of all elements of the loan file, in reality Kwiatanowski simply double-checked a summary of the payment history against computer reco
rds she didn’t generate. “Did you sign the document in front of a notary?” Kowalski asked.

  “No,” Kwiatanowski replied, explaining how she would leave documents in a folder that the notary picked up later. She signed hundreds of affidavits a day as a “limited signing officer”—what Matt Weidner would years later term a robo-signer.

  Kowalski immediately flew back to Jacksonville and moved for sanctions for fraud upon the court. And in early 2006 the judge agreed that GMAC submitted false testimony, awarding $8,134.55 in legal fees to the defense and demanding that the servicer fix affidavit processes within thirty days, so they represented actual reviews of the material facts. GMAC promised it would.

  Kowalski didn’t realize that Kwiatanowski admitted to a standard practice replicated throughout the industry, as cover for securitization FAIL. But he did learn that wherever you find process problems in foreclosures, inevitably you find substantive problems. Nothing the banks claimed could be believed. And despite the sanctions, GMAC never changed procedures. In fact, Margie Kwiatanowski got a promotion, and a new employee slid into the limited signing officer role: Jeffrey Stephan.

  Nearly four years later, GMAC would be caught again, this time by Thomas Ice. His wife, Ariane, kept finding Stephan’s name on GMAC affidavits. So in December 2009 Ice Legal brought Stephan to West Palm Beach for a deposition, conducted by one of their young attorneys, Chris Immel. Stephan and his thirteen-member “document execution team” signed documents for GMAC and also for MERS, on behalf of dozens of mortgage originators; said Stephan, “It’s too many entities for me to actually quote.”

  “How many documents would you say you sign on an average week?” Immel asked.

  “I’d say a round number of 10,000. That’s just an estimate, of course.”

  There are 21.7 workdays in a month, on average. So that meant Stephan was signing his name 460 times in an eight-hour day, or 57.5 times an hour, assuming no breaks of any kind. Consequently, he could spend a little over a minute on every document he signed. Maybe the documents were accurate, maybe not; the evidence strongly suggested the latter, as did the swift process of manufacture. But certainly Jeffrey Stephan would have no idea in one minute of review.

  “So these documents wouldn’t be actually executed on your own personal knowledge?” Immel pressed.

  “Right.”

  The standard affidavit in support of mortgage indebtedness begins with this sentence: “The statements appearing herein are based on the Affiant’s personal knowledge.”

  Stephan explained that foreclosure mills created all the documents he signed; the document execution team just put their names to paper, without consulting specific business records or anything in the complaint. And notaries still weren’t present when team members signed; they didn’t even notarize on the same day as the signatures. Stephan answered everything matter-of-factly, placidly describing the quotidian toil of office drones like him: I take this, I sign that. He did not display any recognition of the criminal aspect of his job duties.

  Ice Legal forwarded the Stephan deposition to Michael Redman, just one among many. Michael posted it at 4closureFraud on March 22, 2010. “These depositions would be comical if it weren’t for the fact that people are losing their homes,” he wrote. The Stephan deposition lingered in public for months, and substantiation of GMAC’s illegal practices lingered for years, with nobody taking notice. And then an attorney named Thomas Cox stumbled upon them.

  Cox practiced law for over thirty years, at one point working for Maine National Bank in commercial loan transactions. In those days, small-business loan guarantees were often backed by a mortgage on the owner’s house. During the savings and loan crisis, many loans went bad, and Tom Cox had to prosecute the foreclosures and shut down the businesses. Maine’s a small state, and Cox personally knew a lot of the people he had to evict. He battled depression for years, bruised from acting as the undertaker for someone else’s dream. He even gave up the law for a while.

  In spring 2008 Cox returned to part-time pro bono work. He signed up with Maine Attorneys Saving Homes (MASH), a project run out of the small nonprofit Pine Tree Legal Assistance. MASH made Cox the volunteer program coordinator; he would review foreclosure cases and refer them out to pro bono lawyers. That forced him to peruse every file. And he couldn’t believe what he was seeing. His foreclosure work ended by 2000, so the practices in these cases were brand-new to him and, in his mind, offensive.

  Cox spent a year in referrals, reading the files and noting patterns. Then, in summer 2009, Nicolle Bradbury’s case came over the transom. She lived in a tiny wood-framed house across from a construction site in Denmark, a western Maine town near the New Hampshire border. The purchase price in 2003 was just $75,000, and from the looks of the squalor, she overpaid. Bradbury lost her job and could no longer pay the mortgage. Fannie Mae, the loan owner, moved for summary judgment; GMAC was the servicer. The man who signed the affidavit in support of summary judgment was Jeffrey Stephan. Cox fixated on that name; he had seen it dozens of times.

  MASH didn’t have any lawyers in that rural area, which was about as far as you could get from the continental United States while still being in it. So Cox decided to take it, his first foreclosure case in a decade. The year of examining shoddy files made him progressively angrier, and he craved an opportunity to fight. Stephan’s title, “limited signing officer,” implicitly admitted that he knew nothing about the underlying facts of the case, Cox alleged. Plus the amount due Stephan verified was wrong; it didn’t fit the amortization schedule.

  Judge Keith Powers, an old colleague (Cox was involved in hiring Powers at his first law firm), didn’t want to hear it. In January 2010 Judge Powers approved summary judgment on everything except the amount due, keeping the case alive by a thread. Cox thought the order stank. He walked into a colleague’s office at Pine Tree Legal Assistance and vowed, “I’m not going to let this stand.”

  He served a notice of deposition for Jeffrey Stephan. At first GMAC and Fannie Mae’s lawyers wouldn’t allow it; maybe someone remembered Stephan’s deposition with Ice Legal a month before. But Cox issued a letter rogatory in Maine court to compel Stephan’s testimony in Pennsylvania, a rare tactic typically used between countries to subpoena witnesses out of jurisdiction. The plaintiffs were caught flat-footed. The judge signed the letter, and a Pennsylvania court issued the subpoena for Stephan.

  A couple of months before the deposition, Chet Randle, who ran MASH, stopped by Cox’s office. “Somebody beat you to it,” Randle said. “They deposed Stephan down in Florida.” Cox got a copy of the Ice Legal deposition. He contacted Chris Immel and had several lengthy discussions, which helped him prepare questions. Through a lawyer listserv, Jim Kowalski contacted Cox about his deposition four years earlier with Margie Kwiatanowski. Cox recognized the name; Ice Legal got Stephan to admit that Kwiatanowski was his boss. Incredibly, Cox was able to quickly locate four years of significant evidence of GMAC’s illegal schemes, but nobody in law enforcement ever did. Cox alerted the Maine attorney general’s office that they should have someone sit in on the deposition. Nobody ever responded.

  On June 7, 2010, Cox arrived at the law offices of Lundy Flitter Beldecos & Berger in Narberth, Pennsylvania, for the deposition. GMAC didn’t even have a lawyer attend; she was conferenced in on the phone, with a local attorney standing in her place. Despite the Ice deposition, Cox thought GMAC seemed remarkably unprepared for his questioning. During the ninety-minute interview, Cox steered the same path as Chris Immel, getting Stephan to admit he signed up to ten thousand documents a month without personal knowledge of anyone’s case; nor did he or his document execution team check the physical data for accuracy. “I compare the principal balance. I review the interests. I take a look at the late charges,” Stephan said. “That’s about it.”

  “So is it correct that you do not know whether any other part of the affidavit you sign is true?”

  “That could be correct.”

  Cox raise
d his voice a little. “Is it correct?”

  “That is correct.”

  After GMAC’s representative left the room, Cox asked the court reporter if he could get a rush copy of the transcript within two days. “It’ll cost you $300,” the transcriber said.

  Cox passed that transcript to several lawyers, including Jim Kowalski and the Maine attorney general. The transcript wound up on April Charney’s listserv, where Matt Weidner found it. He posted the Stephan deposition on his site on June 15, eight days after it was taken. Michael Redman saw it and cross-posted it at 4closureFraud.

  Shortly thereafter, Cox got a call from a tall-building lawyer newly attached to the Nicolle Bradbury case. The TBL angrily questioned how the Stephan deposition got leaked to websites. “I don’t have to tell you anything,” Cox said. GMAC never called Matt Weidner and demanded he take it down; if they did, he would have told them to fuck off. But GMAC did attempt to block public release of the transcript and to sanction Cox for “malicious dissemination.” Cox counterfiled to dismiss the case based on fraud. “When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t,” Cox wrote in his motion. “When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits.”

  GMAC “replaced” the Stephan affidavit with a new one. And the TBLs had one response: Nicolle Bradbury didn’t pay her damn mortgage. But Judge Powers ruled against the TBLs. Even the new affidavit was flawed; it didn’t include the street address of the home, among other inaccuracies. And GMAC’s practices irked the judge. “The Court is particularly troubled by the fact that Stephan’s deposition is not the first time that GMAC’s high-volume and careless approach to affidavit signing has been exposed,” Judge Powers wrote, referring to both Jim Kowalski’s case and Ice Legal’s Stephan deposition. “It is well past the time for such practices to end.”