Chain of Title

by David Dayen

  Michael attributes the decline of 4closureFraud to the death of Google Reader. All his keyword searches and news feeds were wiped out, and he never quite figured out how to replace them. Plus there was less urgency to cover every detail of foreclosure nation anymore: after a while it just felt pointless. The site still looks the same, the Carol Asbury ad replaced with a bigger one for Evan Rosen. But he can go weeks without writing, unlike the daily grind of the activism years. Instead of trying to save the nation, Michael has pulled back, trying only to save one Florida homeowner at a time.

  It can be difficult. Too many judges in Florida, and really nationwide, aren’t willing to enforce the full panoply of the nation’s property laws. A securities lawyer put it to me this way: Judges like to avoid big legal issues whenever possible. Why bring foreclosures to a standstill if they can find an escape route? Besides, the judges come from the same class as the plaintiff lawyers, not the homeowners. Even when those lawyers openly lied to them and defiled their courtrooms, they couldn’t bring themselves to sanction them if it meant giving some deadbeat a free house.

  I attended a mock court session Evan Rosen coordinated to teach sixteen defense lawyers in Fort Lauderdale. Rosen played the bank attorney and his colleague played the judge. The biggest innovation banks have made in judicial foreclosure states has been to bring the fraud into the courtroom. Instead of having a robo-signer create an affidavit attesting to the validity of the foreclosure, a professional “robo-witness” walks into court and testifies to the accuracy of the records. For the mock court, Lisa and Michael were the robo-witnesses.

  The robo-witness knows as little about the case as the robo-signer, having read the documents a moment before testifying, if at all. They are hired from low-skill temp jobs, with no record of bank employment. They have no firsthand knowledge about how the payment history was generated, whether the note was properly endorsed, or whether the plaintiff has a complete chain of title. The only difference between them and robo-signers is that they look the part. “The witnesses are actresses,” Michael told me. “They hire somebody to parrot a script. If you actually trained them to know anything, it would cost money.”

  The strategies Rosen taught didn’t hinge on fraudulent evidence or standing to foreclose. Those crimes are off-limits in Florida courts these days. You may get a win on a missing delinquency letter—April Charney’s old defense, nailing servicers for failing to inform borrowers how to cure a default. You could maybe hit the plaintiff for not presenting documents as evidence before trial, or violating another courtroom procedure. You could argue that the account statement provided was a summary and not a full loan history. You had to play around the edges to find something the judge would accept, to make them think they’ll look smart if they align with the defense.

  The mock judge kept overruling defense objections. “This trial is going on no matter what,” she said, smacking down a challenge. It was an accurate depiction. Florida judges are mostly plumbers now, flushing through cases to clear the clog. Banks convinced judges that the only path out of the crisis was to throw people out of their homes. And they convinced the legislature to help make that a reality. After years of false starts and Rallies in Tally, the state did pass a law to speed up the foreclosure process, though it was so poorly written that it actually slowed foreclosures down at first. But in a bizarre irony, Florida allocated $36 million from the National Mortgage Settlement, intended to aid homeowners, to fund high-speed foreclosure courts for another three years. Bank penalties finance homeowner evictions. The new rocket docket has a mandate to clear 256,000 foreclosure cases a year. One judge in Broward County closed 786 cases in a single day, mostly final judgments against homeowners. Florida homeowners in foreclosure have two adversaries: their lender and their government.

  Law enforcement in Florida hasn’t batted an eye at this seeming destruction of due process. A judge allowed one foreclosure mill law firm under investigation by attorney general Pam Bondi’s office, Shapiro & Fishman, to quash a subpoena for records, on the grounds that only the Florida bar could discipline law firms. Michael was at the trial and said it was incompetently argued. When an appeals court upheld the ruling, Bondi threw up her hands, saying that she could no longer do anything to stop unfair practices by foreclosure mills. The ruling, according to attorney Tom Ice, left the door open for Bondi to use other statutes to discipline foreclosure mills. But Bondi let it all go, closing the investigation opened by June Clarkson and Theresa Edwards years before.

  The Florida bar belatedly disbarred David Stern in 2014. Marshall C. Watson agreed to a plea deal in 2013 that forced him to shut down his firm. But he reopened it under a different name, Choice Legal Group, and went on representing banks. The mill lawyers mostly haven’t changed; Lisa Epstein told me she once saw an attorney stamping final judgments with the judge’s signature.

  Tom Ice and his colleagues have reversed cases on appeal, a better wager than rocket docket judges. They’ve built up significant appellate court case law imperiling the use of robo-witnesses who have no personal information about the authenticity of the documents. Evan Rosen started going after “robo-verifiers,” servicer employees who signed verifications attesting that the company made every effort to confirm the facts of a particular foreclosure case. They deposed Lona Hunt, robo-verifier for Seterus, a servicer for many loans owned by Fannie Mae. In the deposition, Hunt admitted twice that she never read the complaint before she signed a verification. Off that deposition, Rosen won the case.

  But even when banks lose, the plaintiffs can always voluntarily move to dismiss, fix up the paperwork, and try again. This came to a head in the 2013 Pino decision. Ice Legal tried to force the court to reopen a voluntary dismissal and impose sanctions for fraud. A favorable ruling could have made all Florida mortgages soiled by false documents unenforceable. But the state supreme court ruled that voluntary dismissal was fine. “It’s happening every day,” Tom Ice told me, “and the world doesn’t care.”

  Servicers can afford to lose one case if another twenty go through because homeowners don’t have the resources to contest the eviction. Defense attorneys amount to nuisances, not a real impediment to the business model. But for now, it’s all Michael can achieve. When he succeeds—and he often does—it’s thrilling. “We do it home by home and client by client,” he tells me over drinks. “It’s amazing what we can do for people.”

  “The plaintiff does not have standing, your honor,” says the defense counsel in the case of U.S. Bank as Trustee for Citigroup Mortgage Loan Trust v. Mara Papasoff. He’s holding a note with a special endorsement to Bishop’s Gate Mortgage Trust, not U.S. Bank. Bishop’s Gate was some middleman link in the securitization chain. But the endorsement in its name made the case problematic.

  “If the endorsement identifies a party, it’s only payable to them,” the defense attorney continues. “Only Bishop’s Gate can sue on this note. The case has to be dismissed.” This was exactly the same issue in Lisa Epstein’s case, six years earlier: a note endorsed to a party other than the plaintiff, making it impossible for the plaintiff to enforce. The trustee was even U.S. Bank in both cases. And Lisa Epstein is sitting next to me, watching this transpire in courtroom 4A in the Palm Beach County Courthouse.

  The plaintiff’s lawyer insists that U.S. Bank has standing because the assignment indicated its acquisition of the mortgage. So instead of the longtime industry assertion that the mortgage follows the note, in this case the bank argued that the note follows the mortgage. “This is what you call a shuck and jive,” Lisa says.

  Judge Roger Colton, a retired judge paid with rocket docket funds, looks perturbed that he must make an actual decision. He tells the parties he will take the case under advisement. A week later he did affirm final judgment of foreclosure and set a sale date, despite the evidentiary problems. But then the parties filed a joint motion to vacate the judgment, and Judge Colton put the sale on hold, pending another hearing. The case remains in limbo.

  Li
sa and I head to the courthouse commissary to chat. After losing the race for clerk of courts, Lisa took a year off for rest and self-preservation. She handed Foreclosure Hamlet to KT, the foreclosure fighter from Maine, who told me that she stayed on the site sixteen hours a day, drawing purpose from confused homeowners seeking help. Tragically, KT died of a recurrence of breast cancer in June 2015, so the future of Foreclosure Hamlet is unknown. KT and Lisa never had the chance to meet.

  Lisa also works for Evan Rosen, but she doesn’t go to Fort Lauderdale every day, telecommuting from her tiny apartment in the Royal Saxon, on the Intracoastal. Lisa works during the day, while Jenna is at school, and picks her up in the afternoon. They get to talk, read together, and bond. Distracted by foreclosure fraud, Lisa missed three critical years as her child grew up. She would have done her best as clerk of courts, but in losing, Lisa won back the semblance of a normal life.

  On the weekends Lisa and Michael and the kids sometimes get together. Jenna and Nicole play while the adults sit in the backyard, talking shop or reminiscing. They were strangers, became partners, and are now best friends. I spent a night with them in the backyard, and they excitedly overlapped each other’s sentences, laughing about the old days. They prefer to remember the good parts.

  Lisa still hears from homeowners and the media. People she doesn’t even remember come up to her and say, “I think about you all the time.” Lisa usually doesn’t respond to the emails; she finds it too harsh to tell them to consider moving on with their lives. Everyone assumes the pioneers of the movement to fight foreclosure fraud must have the answer that unlocks the key to saving homes. To Lisa, there is no answer.

  The house on Gazetta Way that Lisa never wanted, the one she bolted from the first chance she could get, remains in foreclosure. A new debt collector pursued final judgment a while back, but canceled the hearing at the last minute. One of Alan’s cousins lives there now. Lisa and I go over to check the place out. It did have a feeling of randomness to it, an artifact of its rush to market. The trees are a bit bigger now, but one of them was slumped over, half dead. There’s still a picture of an infant Jenna on a table in the enormous front room. Lisa flips through a stack of late notices, urging her to cure her debt. The co-op, meanwhile, is fully paid off.

  Lisa looks back on those years of activism as if remembering a distant dream. “It’s like an intense romance in your teens. You can’t picture that person now, but he meant the world to you then.” She doesn’t recognize the woman in hospital scrubs who ran from courtrooms to protests to meetings to research sessions, leaving cartoon hairpins flying behind her, feeding off the energy that comes from deep focus. When we talk about what she did, Lisa shakes her head at how crazy it all was, how all-consuming. For all the criticism about “hogging the spotlight,” Lisa was a reluctant warrior. She’s relieved to get to read a book again or spend time with her daughter without jumping to the computer for the latest foreclosure fraud news. “It’s done now. And I’m glad it’s done.”

  The activists who helped expose foreclosure fraud did everything civics classes teach us will create effective change. They found patterns of systematic criminality. They coordinated and gathered evidence. They organized, using old-fashioned protests and new media tools, paralleling the pamphleteers of the American Revolution and the muckrakers of the Progressive Era. They built a movement of similarly situated followers, and publicized their cause through the media. With persistence, they enlisted support from figures of authority. They helped file lawsuits against the perpetrators. They ensured that the whole nation, from a circuit court judge to the man seated in the Oval Office, would know what happened. They did all this while simultaneously fighting their own foreclosures.

  Their tactics weren’t always perfect. They put too much faith in a justice system dismembered by collusion between Washington and Wall Street. The motivation to try anything to expose the truth led to some unwise decisions. Critics accused them of taking too much credit. The worst charged they just wanted a free place to live. They were at times stubborn, naive, and self-destructive. In other words, they were human.

  But what Lisa Epstein, Michael Redman, and Lynn Szymoniak learned, through triumphs and stumbles, is that this democratic ideal of grassroots action doesn’t work the way it’s described in history textbooks or Frank Capra narratives. At least, it doesn’t work when you go up against banks, even if you have the truth on your side. “I believed there would be a resolution for everybody,” Lisa told Michael and me at a recent dinner. “I don’t believe it anymore.”

  Grassroots movements can succeed in America. Recent civil rights advances for gays and lesbians owe much to ACT UP holding die-ins in the streets in the 1980s. The nation now believes the Iraq War was a mistake, largely because liberal bloggers made that case daily. Even economic movements, like the low-wage worker Fight for $15, can post victories. Why does Wall Street benefit from a protective bubble, preventing accountability at every step? What’s become of our system, that policy makers can ignore millions of pieces of false evidence used to dispossess Americans to this very day?

  Those are difficult questions to answer. But the easiest way to discourage dissent is to cast it as hopeless; that robs the purpose from fighting. It’s a testament to the innate desire for human understanding and the power of the Internet that, despite so many hurdles—from a desiccated public square to an ignorant media to a massively powerful financial sector to a law enforcement elite acting as their servants—the foreclosure fraud story got so far. And the story of movements in America is that they crash onto the shore like waves of the incoming tide, each one progressing a bit further than the last.

  Crooked banks rely on isolation and shame. The isolation renders the prospect of individual homeowners fighting big banks impossible; the shame makes no level of misconduct from Wall Street as critical as missing a mortgage payment. The foreclosure fighters created community spaces to disarm isolation and shame, giving struggling homeowners a voice and a chance. Without the foreclosure fraud movement there is no Occupy Wall Street; there is no Elizabeth Warren wing of the Democratic Party; there is no student debt movement, or low-wage worker movement, or movement to transfer money to credit unions and community banks. Lisa and Michael and Lynn, and all the bloggers and lawyers and activists who put their heart into this issue, raised public consciousness so that mega-banks have lost just a hint of their aura of invincibility.

  There are new rules against predatory lending and servicing, courtesy of the Consumer Financial Protection Bureau, a rare example of grassroots energy forging a regulatory agency. The crisis in Minneapolis created by the successful eviction defense arranged by Occupy Our Homes set the stage for a statewide foreclosure prevention law called the Homeowner’s Bill of Rights; a similar bill rose from below and passed in California. Lisa Epstein’s Skype session to the Hawaii legislature helped turn the island into a judicial foreclosure state. State and federal officials told me that without the passion of people like Lisa and Michael and Lynn, the admittedly meager outcomes in the litany of big bank settlements over the past several years would have been markedly worse.

  In his office in St. Petersburg, Matt Weidner offered an optimistic take, an anomaly for him: “When you look at the vast amounts of legal and advocacy work that was done, it was extraordinarily successful. If you decided that you were going to fight this, you’re likely still in your home today.” He believes banks did change their behavior, partially out of reluctance to duke it out for years with experienced defense attorneys. “The default model of foreclosure litigation doesn’t exist anymore because people fought. If everyone shut their mouth, David Stern would still be in business.”

  We should temper the shouts of triumph. It’s an enormous failure of public policy that we don’t know precisely how many families lost their homes in the foreclosure crisis. But the best estimate is close to six million. And that doesn’t include millions more who gave up their homes in short sales or “cash for keys” trades.
Repeated studies show that people living in areas with high foreclosures suffer elevated physical and mental health ailments. A 2014 report in the American Journal of Public Health linked high foreclosure rates with increased suicides. The foreclosure crisis generated the largest ruination of middle-class wealth in nearly a century. Former congressman Brad Miller calls it “an extinction event” for the black and Latino middle class. It contributed massively to the soaring inequality of what some call the new Gilded Age. Amid the carnage, people became wary of volatile assets like mortgages, stunting future economic growth.

  Perhaps most important, homeowners and municipalities must deal with corrupted property records, questions of true ownership, and “clouded title” for years to come, if not decades. There’s a respected Florida lawyer named Henry Trawick who practically wrote the rules for legal practice and procedure in the state. He worked as a title officer in the 1950s, struggling to reconcile Depression-era mortgages with pervasive flaws, and he sees the same mess now. It took a long time after the Depression to scrub the rot out of the system. It may take longer today.

  But even among those who most deeply internalized the pain of this scarred American landscape, the hope hasn’t been snuffed out. In fact, Lisa, Michael, and Lynn got back together in 2014 to take on Diana Lewis, the rudest, most loathsome foreclosure judge in Florida, who heard several of the cases described in this book. Lewis’s father, Philip, was a powerful state senator whose name is stamped on a homeless intervention facility in Palm Beach County, and the joke is that his daughter kept it well stocked.

  When Lewis came up for reelection, Jessica Ticktin, a thirty-five-year-old foreclosure defense attorney who argued cases in her courtroom, decided to challenge her. Lawyers across the state contributed to Ticktin’s campaign. And the foreclosure fighters did their part. On a hot August Election Day, Lisa and Michael stood on their feet for hours, encouraging voters to dump Lewis. It worked—Diana Lewis lost 54 percent to 46 percent, becoming just the fourth Palm Beach County circuit judge to be booted in the last thirty years. Lynn went to court the next day, just to observe. Judge Lewis was unusually peevish.