[Congressional Record Volume 156, Number 133 (Wednesday, September 29, 2010)]
[Extensions of Remarks]
[Page E1871]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




      FORECLOSURE FRAUD! BANK RATES VERSUS RULES FOR EVERYONE ELSE

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                           HON. ALAN GRAYSON

                               of florida

                    in the house of representatives

                     Wednesday, September 29, 2010

  Mr. GRAYSON. Madam Speaker, foreclosure fraud can affect anyone, 
whether you have a mortgage, are paying on time, have income, or not. 
The average foreclosure hearing in a Florida court is 90 seconds. 
Mistakes are common, and fraud is rampant. Everyone is familiar with 
dealing with a big bureaucratic institution. What is happening is that 
these big bureaucratic loan servicers are charging fees 
inappropriately, refusing to talk to homeowners by putting calls 
through to call centers in India, and then foreclosing with forged 
documents once the homeowner has been drained of all assets and the 
will to fight.
  There is one set of rules for banks, and another set of laws for 
everyone else. A servicer can ask for fees, it can demand payment, it 
can send you to call centers in India, and it doesn't have to 
negotiate. And you now have virtually no rights as a homeowner.
  Here are four bizarre examples:
  (1) Last summer, Fort Lauderdale resident Jason Grodensky experienced 
what has tragically become an increasingly familiar process all across 
America: his house was sold at a foreclosure sale after a bank notified 
the Florida courts that Grodensky had defaulted on his mortgage. The 
foreclosure came as a surprise to Grodensky, according to reports from 
the Sun-Sentinel. Not only did Grodensky not have a mortgage with the 
bank that sued to foreclose against his house, he had never had a 
mortgage at all. Grodensky had paid cash for his home.
  (2) One house in Pinellas County, Florida saw two foreclosure suits 
brought against it because the banks didn't know who had title to the 
mortgage.
  (3) One victim with a perfect payment record of all interest and 
principal was foreclosed on because of a $75 contested late fee.
  (4) Tim and Nicole West were victims of a predatory loan. In 2005, a 
bank threatened to sue the couple if they didn't sign a refinancing 
offer. Their loan servicer subsequently raised their payments from 
$1900 to $5300 a month, with regular forebearance fees required in the 
tens of thousands of dollars. Finally, the servicer refused to accept 
payments from the family in the name of negotiating for a mortgage 
modification. Instead of modifying the loan, their servicer began 
foreclosure proceedings. The servicer used fraudulent documents to 
prove that it had the right to foreclose.
  Here's how it happened.
  Securitizating mortgages was originally a way to take the cost of a 
mortgage of a bank's books. From 2005 onward, the securitization chain 
went out of control, and Wall Street wanted as many mortgages as it 
could get, as quickly as possible, and as cheaply as possible. In order 
to allow it to pull out more fees at every link in the chain, subprime 
lenders, trusts, and banks decided to cut as many costs as possible, 
including record-keeping. They didn't keep good records, and violated 
the laws mandating that they had to file records with county clerks on 
who owned what mortgage title.
  Instead, banks simply digitized mortgage titles into a privatized 
system called the Mortgage Electronic Registry System (MERS) and did 
the transfers by trading Excel spreadsheets among banks and trusts 
rather than by endorsing the notes as required by their own contracts, 
state real estate law, and IRS rules. Today, MERS is the registered 
owner of a security interest in 60 million properties or about 60% of 
the mortgages in the United States. 97% of the loans originated between 
2005-2008 are in MERS.
  It appears that on a widespread, probably pervasive basis, they did 
not take the steps necessary for them to own the note (a borrower IOU), 
which means that in 45 of 50 states, they lack the legal right to 
foreclose. Thus, every trust now has questionable legal standing in 
foreclosures in the overwhelming majority of states. In addition, the 
records were poorly kept, so servicers are basically guessing that they 
have the right to foreclose when they foreclose.
  Obviously, the banks do not want to grapple with the consequence of 
trillions of dollars of securitized mortgages having no legal standing 
to foreclose. So, they have simply created a system whereby servicers 
hire `foreclosure mill' law firms whose business is to forge documents 
showing that they have a legal right to foreclose. Some of these mills 
have been featured in the New York Times, and so-called `robo-signers', 
people whose names show up on thousands of affidavits, despite obvious 
forgeries and overt admissions that these people had no knowledge of 
what they were signing.
  The system is so organized that there is a company, Lender Processing 
Services, who allegedly has created the means to systemize fraud. 
Lawyers use the LPS system to request which affidavits and documents 
they need. LPS then has `document mills' where they can magically make 
an authorized Vice President of Whoever You Need, and send you 
backdated signed documents saying you have the right to foreclose. 
Courts at first refused to believe that this level of rampant fraud 
exists, but more recently, they have started to sanction fraud against 
loan servicers.
  Servicers don't make money through routine servicing; it's a break-
even business. They make it at foreclosure, with a $6,000 foreclosure 
fee. When you combine the incentive to foreclose with systemized fraud, 
it's lawlessness.
  Fraud is now big business. And it's sanctioned in part through the 
government, as both Fannie and Freddie are shareholders in MERS.
  We're approaching the point where the easiest way to make a buck is 
to steal it. The only way to end this plague of foreclosure fraud is to 
make sure that crime does pay.

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